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 About Donald

Don founded Kamakura Corporation in April 1990 and currently serves as its chairman and chief executive officer where he focuses on enterprise wide risk management and modern credit risk technology. His primary financial consulting and research interests involve the practical application of leading edge financial theory to solve critical financial risk management problems. Don was elected to the 50 member RISK Magazine Hall of Fame in 2002 for his work at Kamakura. Read More

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

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Kamakura Corporation
2222 Kalakaua Avenue

Suite 1400
Honolulu HI 96815

Phone: 808.791.9888
Fax: 808.791.9898

Americas, Canada
James McKeon
Director of USA Business Solutions
Phone: 215.932.0312

Andrew Zippan
Director, North America (Canada)
Phone: 647.405.0895

Asia, Pacific
Clement Ooi
Managing Director, ASPAC
Phone: +65.6818.6336

Austrailia, New Zealand
Andrew Cowton
Managing Director
Phone: +61.3.9563.6082

Europe, Middle East, Africa
Jim Moloney
Managing Director, EMEA
Phone: +

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Kamakura Blog


“You’re not going to believe this,” my friend’s note said.  “Check out this annual report and look how one of the largest banks in the world is reporting its interest rate risk.”  He was right. I took a look at this large and prestigious bank’s interest rate risk reporting and I was immediately transported back to the disco era, 1977.  This post turns the clock back 30 years and explains how using net income simulation, with no market valuation-based risk analysis, destroyed the savings and loan industry and cost the U.S. taxpayers $1 trillion the first time.  We also explain how a bank, which we call Bank X, traveled so far back in time.

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For many years, “operational risk” was an area of risk management of great interest but lacking in a theoretical and conceptual framework that would place operational risk in the context of an integrated approach to enterprise wide risk management.  Indeed, to many, “operational risk” was a table of losses for specific events and not much else.  This is the operational risk equivalent of credit risk modeling with loss given default statistics but no default probabilities.

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One of the few virtues of being an aged (or more politely, “experienced”) risk manager is that one has made a lot of analytical mistakes that are easy to remember. Another virtue is that you have seen others make mistakes that proved fatal or near fatal, so we can remember the consequences of those errors too. In risk management, it would be nice if we never repeated the mistakes of the past, but, alas, we take two steps forward and one step backward. In this series, we discuss risk management errors by some of the world’s largest financial institutions and point out their consequences to help all of us avoid errors of the past and obvious errors going forward. In this post, we point out the consequences of basing risk assessment on a pseudo monte carlo approach instead of the real thing.

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Traditional asset and liability management (ALM) has ignored mortgage defaults and focused on interest rate-driven and mortgage age-driven prepayment. The events of the last two years have made it more obvious that prepayment and default are intimately linked and that home prices are a critical driver of both probabilities. This post explains how mortgage prepayment and default are modeled on an integrated basis using multinomial logit.

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One of the most frequently asked questions posed by clients is this: How did Kamakura choose Honolulu for its head office location? This post explains.

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