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Derivatives Primer

Answers to the questions most frequently asked about derivativesand their use by private pension plans.

December, 2001

Table of Contents

Introduction

Executive Summary

What is a Derivative?

How are Derivatives Used?

General
Pension Funds

What are the Risks?
Sources
Controls
Summary

IntroductionThe Committee on the Investment of Employee Benefit Assets (CIEBA) of the Association for Financial Professionals has published this overview in order to support reasoned discussion of issues related to derivatives and their use by private pension plans.

CIEBA is a nationally recognized voice for those corporate financial officers who administer and manage, as fiduciaries, the investment of funds for employee and welfare benefit plans regulated under the Employee Retirement Income Security Act (ERISA). CIEBA's 120 members collectively manage more than $1 trillion in assets for 15 million participants, including both union and non-union employees and retirees and their beneficiaries.

The Association for Financial Professionals in Bethesda, Maryland supports more than 14,000 individual members from a wide range of industries throughout all stages of their careers in various aspects of treasury and financial management. AFP is the preferred resource for financial professionals for continuing education, financial tools and publications, career development, certifications, research, representation to legislators and regulators, and the development of industry standards.

Table of Contents

How are Derivatives Used?

Introduction

What are the Risks?

Executive Summary

Summary

What is a Derivative?

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Derivatives Primer

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