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Research and practice with derivative instruments by States and Municipalities in Mexico are virtually unexplored. This paper investigates the effect of interest rate jumps and financial contagion on the risk exposure of Subnational Government debt swaps in Mexico. Unconditional risk exposure measures of debt swaps are obtained by simulating a set of stochastic processes with jumps. Simulation results confirm that risk exposure of local debt swaps increases with Poisson discontinuities while a significant effect is observed after crisis contagion is accounted for.