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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

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 8, 2014
Forward 1 Month T-Bill Rates Plunge 0.26% in 2 Years but Forward 10 Year U.S. Treasury Yield Drops Only 0.04% from Last Week

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 30, 2014
American International Group Inc. Bonds:
A Reward to Risk Ratio Twice as High as the Median Bond Issue


July 29,2014
AT&T Inc. Bonds: Ten Times the Risk of IBM and Below Average Value

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


July 14, 2014
Bank of America and MBIA Lead U.S. Bank Credit Default Swap Trading Volume, 2010-2014

March 19, 2014
Stress Testing and Interest Rate Risk Models: A Multi-Factor Stress Testing Example

March 13, 2014
Stress Testing: A Credit Spread Ranking of 12 U.S. and 12 International Banks

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Kamakura Blog

  

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 July 28, 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 July 29, 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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Today’s blog focuses on the U.S. dollar funding shortfall that took place at Societe Generale’s New York branch during the period from February 8, 2008 to March 16, 2009. With the exception of the incident with rogue trader Jerome Kerviel in January 2008, Societe Generale was in the headlines much less than many of its peers. Despite that, data from the Federal Reserve reports that Societe Generale borrowed a peak amount of $8 billion on September 19, 2009, more than Lehman Brothers borrowed from the Fed prior to the September 14, 2008 announcement that the firm would file for bankruptcy.  Societe Generale’s borrowings in the immediate aftermath of the Bear Stearns collapse, $3.5 billion, were also higher than Lehman’s $2.7 billion in borrowings during the same period.

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Today’s blog focuses on the U.S. dollar funding shortfall that took place at the German bank HSH Nordbank AG’s New York branch during the period from February 8, 2008 to March 16, 2009. HSH Nordbank is not an institution that is as well-known as its rival banks in Germany, but a study of its funding shortfall reveals a surprising fact: U.S. taxpayers were funding the rescue of HSH Nordbank even before the German government came to its rescue. We explain why in what follows.

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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 July 21, 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 July 22, 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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Today’s blog focuses on the U.S. dollar funding shortfall that took place at Bank of New York Mellon (“BNY Mellon”) during the period from February 8, 2008 to March 16, 2009. BNY Mellon navigated the 2007-2009 credit crisis as skillfully as any other U.S. financial institution.  Like State Street, BNY Mellon did incur losses from its fund management business, a source of losses that is surprising to many who would have expected the end investors in those funds to take 100% of any decline in the price of a fund.  Even though BNY Mellon avoided the headlines and major problems very skillfully, on October 15, 2008, BNY Mellon had $41.6 billion in loans outstanding from the Federal Reserve, $13.6 billion more than Lehman was refused by the Fed until Lehman announced it would file for bankruptcy on Sunday, September 14, 2008.

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