Abstract Derivative is a double-edged sword. It can be used to be risk management tools, on the other hand, it also relates with significant risks, including credit risk, operations risk, market risk, liquidity risk, etc. It can threaten the safety and soundness of entity if it is not clearly understood and properly managed. It's crucial to establish and maintain risk management mechanisms, especially internal control to limit the risks related with derivatives. More importantly, it should be assured that all relevant control policies and procedures be implemented rigorously.
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Received: 26 December 2006
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