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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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Kamakura Corporation
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For Kamakura blog readers, it's a  pleasure to let you have advance warning that the Kamakura troubled company index declined again in a major way in June, dropping another 2.4% to 16.4%.  The index is now well below the March 2009 peak of 24.3.  The full details will be included in a press release on Tuesday, June 30.

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The Reuters story on Elizabeth Warren’s comments can be found at this link: http://www.reuters.com/article/newsOne/idUSTRE55M7CY20090624 Some would argue that protecting consumers from borrowing money that the consumers want to borrow has a lot in common with smoking.  As a child in the 1950s, I was fully aware that smoking causes cancer and that it was addictive.  For that reason, I have never smoked a single cigarette.  Tobacco clearly does more harm than “bad loans,” with 400,000 premature deaths a year estimated to come from smoking.  The government has been warning of the harmful effects of smoking for more than 50 years, but many people much younger than I am choose to smoke.  Why do we not (a) make tobacco illegal or (b) create a Consumer Anti-Tobacco Prevention Agency that intervenes so that consumers do not have the option to do something that is obviously “not in their best interest”? Our recent blog post on risk management strategies for individual investors argued that if your income doesn’t...

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A number of financial institutions have written to say that they’ve linked macro factors to credit losses, but the next step in the process is unclear. Take the stock index 2 year return, a statistically significant macro factor in the version 3.0 KRIS default models, as an example. If one can predict credit losses as a function of this macro factor, what’s the hedge? Can one just short stock index futures? This post illustrates the answer with a simple example.

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