By Donald van Deventer on
11/10/2009 12:41 PM
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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By Donald van Deventer on
11/5/2009 11:11 AM
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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By Donald van Deventer on
11/2/2009 10:53 AM
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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By Donald van Deventer on
10/28/2009 11:45 AM
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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By Donald van Deventer on
10/27/2009 1:47 PM
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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