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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
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: +

Tokyo, Japan
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


It is common practice among credit analysts to use historical default rates published by rating agencies as a proxy for a true forward-looking firm-by-firm set of modern corporate default probabilities.  This analysis shows that such approximations of true portfolio losses are grossly inaccurate. In the current environment, historical losses reported by rating agencies overstate near-term losses and seriously underestimate long-run losses.

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Experienced credit risk professionals with a lot of modeling background soon come to appreciate that there is an important distinction between the model that predicts the most accurate default probability term structure for a company now and the model that best predicts that term structure at some point in the future.  There are a number of key points that highlight the distinction:

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In this note we update our October 4, 2017 analysis of realized and “in progress” term premiums in the U.S. Treasury market through December 31, 2017.

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In 1996, the U.S. Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency jointly declared their rejection of a standardised regulatory model for interest rate risk:

“…the agencies have decided that concerns about the burdens, costs, and potential incentives of implementing a standardized measure and explicit capital treatment currently outweigh the potential benefits that such measures would provide. The agencies are cognizant that techniques for measuring interest rate risk are continuing to evolve, and they do not want to impede that progress by mandating or implementing prescribed risk measurement techniques.”

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“It doesn't make sense to hire smart people and then tell them what to do. We hire smart people so they can tell us what to do.”

Steve Jobs, from Steve Jobs: His Own Words and Wisdom


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