Using derivatives to hedgeagainst interest rate risk is not a strategy that looms large onmany credit unions' horizons. However, those that pursue it mayfind significant advantages, according to Emily Hollis, a partner with ALM First, a Dallas consulting firm.

“Derivatives can serve as a valuable tool for some creditunions, offsetting the interest rate risk inherent in today'sfinancial environment,” Hollis said. “When used properly,derivatives allow eligible credit unions to compete moreeffectively, but their restrictions and guidelines must beunderstood and followed.”

Understanding and applying the newly available hedging tools wasthe focus of ALM First's Feb. 20 webinar “The Use of Derivatives.”Hollis led 95 participants through the strategies of hedgingbalance sheet risk with various kinds of derivatives in compliancewith the NCUA's newly released guidelines.