German municipalities have long been active users of derivatives, although not always for the right reasons. Several municipalities, attracted by the potential to manage the interest rate risk on their massive deficits, recently had their fingers burnt as payouts did not quite pan out as expected (Risk May 2006, pages 21-23). However, the regional government of North Rhine Westphalia stands out for its prudent and successful use of derivatives.
North Rhine Westphalia is at the heart of Germany's
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