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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


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Kamakura Blog

  

One of the hazards of the risk management profession is the need to spend long hours on airplanes. Man cannot survive by the collected works of Robert Merton alone, so I often turn to Rex Stout detective novels, featuring the detective Nero Wolfe and his faithful side-kick Archie Goodwin.  Much to my surprise, Rex Stout through his characters had a lot to say that’s useful to risk managers.  Here are a few of my favorite quotes.

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10 Year Forecast of U.S. Treasury Yields And U.S. Dollar Interest Rate Swap Spreads
Today’s forecast for U.S. Treasury yields is based on the January 20, 2011 constant maturity Treasury yields that were reported by the Board of Governors of the Federal Reserve System in its H15 Statistical Release at 4:15 pm January 21, 2011. The “forecast” is the implied future coupon bearing U.S. Treasury yields derived using the maximum smoothness forward rate smoothing approach developed by Adams and van Deventer (Journal of Fixed Income, 1994) and corrected in van Deventer and Imai, Financial Risk Analytics (1996). For an electronic delivery of this interest rate data in Kamakura Risk Manager table format, please subscribe via info@kamakuraco.com.

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The copula method has been much vilified as the “Formula that killed Wall Street,” and this criticism is extremely well deserved.  The copula approach, however, is still widely used and an understanding of how it works is important for a key reason: once one understands how it works, one understands why one should not use it for credit portfolio management. This blog talks about one key issue in the practical use of the copula method: how to derive a pair-wise correlation matrix for all counterparties on the assumption that one knows the proper intra-industry and inter-industry correlations. We thank Kamakura Managing Director for Research Professor Robert A. Jarrow for his very helpful comments.

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10 Year Forecast of U.S. Treasury Yields And U.S. Dollar Interest Rate Swap Spreads
Today’s forecast for U.S. Treasury yields is based on the January 13, 2011 constant maturity Treasury yields that were reported by the Board of Governors of the Federal Reserve System in its H15 Statistical Release at 4:15 pm January 14, 2011. The “forecast” is the implied future coupon bearing U.S. Treasury yields derived using the maximum smoothness forward rate smoothing approach developed by Adams and van Deventer (Journal of Fixed Income, 1994) and corrected in van Deventer and Imai, Financial Risk Analytics (1996). For an electronic delivery of this interest rate data in Kamakura Risk Manager table format, please subscribe via info@kamakuraco.com.

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10 Year Forecast of U.S. Treasury Yields And U.S. Dollar Interest Rate Swap Spreads
Today’s forecast for U.S. Treasury yields is based on the January 6, 2011 constant maturity Treasury yields that were reported by the Board of Governors of the Federal Reserve System in its H15 Statistical Release at 4:15 pm January 7, 2011. The “forecast” is the implied future coupon bearing U.S. Treasury yields derived using the maximum smoothness forward rate smoothing approach developed by Adams and van Deventer (Journal of Fixed Income, 1994) and corrected in van Deventer and Imai, Financial Risk Analytics (1996). For an electronic delivery of this interest rate data in Kamakura Risk Manager table format, please subscribe via info@kamakuraco.com.

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