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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 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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Today’s forecast for U.S. Treasury yields is based on the January 12, 2012 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 p.m. Eastern Standard Time January 13, 2012. 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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On January 9, we reviewed trading volume in credit default swaps for 1,090 reference names reported by the Depository Trust & Clearing Corporation and found that only one reference name in the world had averaged more than 10 non-dealer trades per day in the 77 weeks ended on December 30, 2011.  In today’s blog, the fifth in the CDS trading volume series, we look at weekly credit default swap trading volume for sovereigns among those 1,090 reference names.  We find that, in a small subset of sovereign names, there is regular trading, but in modest volume.

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On January 9, we reviewed trading volume in credit default swaps for 1,090 reference names reported by the Depository Trust & Clearing Corporation and found that only one reference name in the world had averaged more than 10 non-dealer trades per day in the 77 weeks ended on December 30, 2011.  In today’s blog, the fourth in the CDS trading volume series, we look at weekly credit default swap trading volume for sub-sovereigns and municipals among those 1,090 reference names.  We find, unfortunately, that (in the words of Gertrude Stein) “there is no there there.”

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On December 28, Prof. Scott Richard published an article in the Financial Times advocating the use of credit default swap spreads in setting of deposit insurance rates. This letter to the editor explains why such an idea, attractive in theory, would be extremely dangerous in practice.

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On January 4, we showed that on average 81.68% of trades in credit default swaps in the trade warehouse of the Depository Trust & Clearing Corporation were trades between dealers.  In today’s blog, the second in the series, we look at weekly CDS trade data since the week ended July 16, 2010 for 1,090 reference names and find minimal “end user” trade volume for the overwhelming majority of those reference names.

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