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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
info@kamakuraco.com

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James McKeon
Director of USA Business Solutions
Phone: 215.932.0312

Andrew Zippan
Director, North America (Canada)
Phone: 647.405.0895
 
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Clement Ooi
President, Asia Pacific Operations
Phone: +65.6818.6336

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

Europe, Middle East, Africa
Jim Moloney
Managing Director, EMEA
Phone: +49.17.33.430.184

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3-6-7 Kita-Aoyama, Level 11
Minato-ku, Tokyo, 107-0061 Japan
Toshio Murate
Phone: +03.5778.7807

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Kamakura Blog

  

In Part 1 of our series on the basic building blocks of yield curve smoothing, we listed 13 different approaches one could take to smoothing yields or forward rates.  In this installment, we talk about how the definition of “best” yield curve or forward rate curve and the constraints one imposes on the resulting yield curve implies the mathematical function that is “best.”  This is the right way to approach smoothing.  The wrong way to approach smoothing is the exact opposite: choose a mathematical function from the infinite number of functions one could draw and argue qualitatively why your choice is the “right one.”  In this post, we discuss the definition of “best” yield curve and the constraints commonly placed on the smoothing process.

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More than 100 people gathered in New York on Wednesday for an excellent conference organized by Structured Credit Investor.  I was a panelist for a session on risk management in the structured products business.  Because the conference was “off the record,” I am sorry that I can only pass on my own remarks and not the more intelligent insights of my fellow panelists.

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Our recent series on Nelson Siegel and other yield curve smoothing techniques has generated an enormous amount of interest. We’ve come to the conclusion that the art of constructing a yield curve deserves more attention than it’s gotten. This blog outlines
what we have planned and seeks your suggestions.

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Throughout the 2007-2009 credit crisis, we’ve heard “too big to fail” over and over again.  Somewhat less frequently, we’ve heard “too small to succeed,” a phrase about those banks who were in trouble but not big enough to be rescued by the U.S. government.  What these troubled times call for are banks that are “Too smart to fail.”  This blog looks at what it takes to meet that standard.

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The U.S. Treasury has just publicized a review of the Treasury’s methodologies for valuation warrants issued to the Treasury as compensation for the government rescues of distressed financial institutions.  Kamakura’s Managing Director for Research Robert A. Jarrow was retained by the Treasury to author this review.  We summarize Professor Jarrow’s insights and add comments in this blog.

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