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An Introduction to Derivative Securities, Financial Markets, and Risk ManagementAdvanced Financial Risk Management, 2nd ed.

 Blog Entries

Kamakura Corporation Named to World Finance 100

September 19, 2014
Primary Mortgage Yields Rise 0.11% and 30 Year Fixed Rate Mortgage Servicing Values Rise 0.36% This Week

September 13, 2014
Comparing the Marginal Cost of Funds for Berkshire Hathaway with BAC and WFC

September 11, 2014
Primary Mortgage Yields Rise 0.02% and 30 Year Fixed Rate Mortgage Servicing Values Rise 0.13% This Week

September 10, 2014
Bank of America: A Pre-Stress Test Credit Risk Report Shows Dramatic Progress

September 9, 2014
Bank of America and Its High Marginal Cost of Funds

September 8, 2014
Royal Dutch Shell Bond Issue Leads the 20 Best Value Bond Trades with Maturities of 1 Year or More

September 4, 2014
Forward 1 Month T-bill Curve Twists, Jumps 0.16% to Peak at 3.33% in February, 2021

August 26, 2014
Transfer Pricing and Valuation Yield Curves without Swap Data: A KeyBank and KeyCorp Example

August 18, 2014
More Evidence on the Funding “Subsidy” of the Too Big to Fail Banks

August 14, 2014
Mortgage Servicing Rights Values Close Mixed for the Week as Current and Forward Mortgage Rates Drop 0.03%

August 13, 2014
Liquidity At Risk – A stochastic look at cashflows

August 12, 2014
Five of Seven Regional Banks Trade at Credit Spreads Better than the Too Big to Fail Banks

August 12, 2014
Kinder Morgan Energy Partners Leads the 20 Best Value Bond Trades with Maturities of 10 Years or More

August 11, 2014
Measuring the Funding Costs of the Too Big to Fail Banks:
The U.S. Dollar Cost of Funds Index™

August 6, 2014
Credit Spreads and Default Probabilities: A Simple Model Validation Example

August 5, 2014
Vodafone Group PLC: Default Risk is Down Sharply But Value Ranks in the Bottom 10% of Bonds

July 15, 2014
Brazil, Italy, Spain, Credit Default Swaps and the
European Commission Short Sale Ban, 2010-2014



Kamakura Blog


The News section of the Kamakura website has the latest release for the Kamakura Troubled Company Index, which is the percentage of 23,807 companies in 30 countries around the world which have annualized short term default probabilities of more than 1%.  This post covers the numbers behind the press release and discusses the implications for the future.

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Accuracy in valuation of assets and liabilities is critical from both a risk management and financial reporting point of view.  Today's changes in "market to market" accounting rules by the FASB under considerable pressure from the U.S. Congress seem intended to hide or to delay the recognition of losses for financial reporting purposes. Without correct valuation, risk measurement will be incorrect, and so will risk hedges. The failure to correctly value collateralized debt obligations in general and mortgage-related CDOs in particular is at the heart of the credit crisis which began in 2007.  This posts list the top valuation mistakes than an institution can make. Ironically, one would be considered a fool to make the same mistakes in one's daily life.  Why is it, then, that Boards of Directors, management and federal regulators have let mistakes like this happen at hundreds of financial institutions around the world? This post is updated as of April 2 wi

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On Tuesday, March 24, 2009, an honest man named Jake DeSantis resigned from AIG.  His resignation letter shows how typical Wall Street compensation systems and the politics of hysteria surrounding the government's love/hate relationship with AIG can destroy value for the common shareholders of AIG, the American taxpayers.

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There has been a long debate in the risk management industry about whether traditional credit ratings are intended to be "point in time" ratings or whether they are intended to be "through the cycle" credit indicators. The reason that such a debate occurs is the vagueness of the maturity and default probabilities associated with a given rating for a specific company at any point in time.  When viewed in the context of a modern quantitative default probability model like Kamakura's KRIS service, the debate about "point in time" versus "through the cycle" is a distinction without a difference.  This post explains the reason why.

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Today, March 23, 2009, Moody's Investors Service joined Standard & Poor's in erasing GE's triple-A rating from the record books.  Moody's had maintained its Aaa rating on GE since 1967, and Standard & Poor's had held GE at the AAA level since 1956.

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