Kamakura Adds 7 Million Traded Bond Prices, Spreads and Yields
for All KRIS Default Probability Clients
NEW YORK, April 6, 2017: Kamakura Corporation announced Thursday that the firm has added 7 million traded bond prices, credit spreads, and bond yields to the Kamakura Risk Information Service (“KRIS”) default probability service for all existing KRIS clients, effective immediately. The visual and downloadable interaction between default probabilities and bond prices allows risk managers and astute investors to exploit bond mispricing on a truly risk-adjusted basis. The simultaneous availability of the KRIS default probabilities and bond prices, yields and spreads on the same screen makes clear that many long-held beliefs among market participants are not true, allowing sophisticated investors to exploit this information arbitrage. The default probabilities and bond information allow for cross-validation of models to a degree that is almost unheard of. The new KRIS data exploits the information vacuum created by the complete lack of price and volume disclosure by credit default swap market participants and information warehouse providers.
Martin Zorn, President and Chief Operating Officer for Kamakura Corporation, said Thursday, “The U.S. corporate bond market is now the most transparent bond market in the world. The contrast with the credit default swap market, for which traded prices and volumes are both hidden from the investing public, could not be greater. The merger of traded bond prices, spreads and yields with KRIS default probabilities has been greeted with great enthusiasm by the early adopters of the KRIS bond information. Because of this, we have elected to release the traded bond information to KRIS users world-wide and make it part of the core offering, effective immediately given the positive benefits that have been reported to us.”
The KRIS default probability service includes default probabilities for 38,500 public firms in 68 countries, all FDIC-insured U.S. banks, 183 sovereigns, and non-public firms world-wide. The newly added bond information is available from January 1, 2007 to the present. On an average trading day, 8,000 bond issues are traded in the U.S. market on approximately 2,000 issuer names daily. This is almost four times the number of reference names traded weekly in the credit default swap market, but in contrast to the CDS market, traded prices and trade volumes are fully disclosed. The Kamakura default probability service is a multiple models default probability service that allows the user to fully understand the large differential in accuracy between a modern “big data” default model using the state of art “reduced form” approach and the 43-year old Merton model. The analytical work on the Kamakura default probabilities is overseen by Prof. Robert A. Jarrow, who has served as Kamakura’s Managing Director for Research since 1995.
In contrast to many suppliers of credit default swap and other financial information, Kamakura Corporation does not trade the securities of any public firms to avoid conflict of interest with its clients.
Most KRIS clients favor the KRIS version 6.0 Jarrow-Chava reduced form default probability model, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The KRIS version 6.0 models were developed using a data base of more than 2.2 million observations and more than 2,600 corporate failures. A complete technical guide is provided to subscribers which includes full model test results and parameters. The KRIS service also includes a wide array of other default probability models that can be seamlessly loaded into Kamakura’s state of the art enterprise risk management software engine Kamakura Risk Manager (“KRM”). Models available include the non-public firm default model, the commercial real estate model, the U.S. bank model, and the sovereign model. Related data includes actual traded prices on all corporate bonds traded in the United States market. Macro factor parameter subscriptions include Heath, Jarrow and Morton term structure models for government securities in the United States, Germany, the United Kingdom, Canada, Spain, Sweden, Russia, Australia, Japan, Thailand and Singapore. All parameters are derived in a no arbitrage manner consistent with the seminal papers by Heath, Jarrow and Morton and Amin and Jarrow. A KRIS Macro Factor Scenario Service subscription includes both risk neutral and “real world” empirical scenarios for interest rates and macro factors.
The KRIS version 6.0 model was estimated over the period from 1990 to May, 2014, which includes the insights of the entirety of the recent credit crisis. The 68 countries currently covered by the KRIS service are Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Cyprus, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, Hong Kong, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kuwait, Luxembourg, Malaysia, Malta, Mexico, Nigeria, the Netherlands, New Zealand, Norway, Oman, Pakistan, Peru, the Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, the United States, and Viet Nam.
To follow the troubled company index and other risk commentary by Kamakura on a daily basis, please follow
Kamakura CEO Dr. Donald van Deventer (www.twitter.com/dvandeventer)
Kamakura President Martin Zorn (www.twitter.com/riskmgrhi)
and Kamakura’s official twitter account (www.twitter.com/KamakuraCo).
About Kamakura Corporation
Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura was named to the World Finance 100 by the Editor and readers of World Finance magazine in 2016 and 2012. In 2010, Kamakura was the only vendor to win 2 Credit Magazine innovation awards. Kamakura Risk Manager, first sold commercially in 1993 and now in version 8.1, is the first enterprise risk management system with users focused on credit risk, asset and liability management, market risk, stress testing, liquidity risk, counterparty credit risk, and capital allocation from a single software solution. The KRIS public firm default service was launched in 2002. The KRIS sovereign default service, the world’s first, was launched in 2008, and the KRIS non-public firm default service was offered beginning in 2011. Kamakura added its U.S. Bank default probability service in 2014. Kamakura has served more than 330 clients ranging in size from $1.5 billion to $1.6 trillion in assets. Kamakura’s risk management products are currently used in 44 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Spain, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, South America, Australia, Japan, China, Korea, India and many other countries in Asia.
Kamakura has world-wide alliances with Fiserv (www.fiserv.com) and SCSK Corporation (http://www.scsk.jp/index_en.html) making Kamakura products available in almost every major city around the globe.
For more information contact
2222 Kalakaua Avenue, Suite 1400, Honolulu, Hawaii 96815
Web site: www.kamakuraco.com