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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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This paper analyzes the number and the nature of factors driving the movements in the Thai Government Bond yield curve from September 15, 1999 through December 31, 2016. The process of model implementation reveals a number of important insights for interest rate modeling generally. First, model validation of observed yields is important because those yields are the product of a third-party curve fitting process that may produce spurious measures of interest rate volatility. Second, quantitative measures of smoothness and international comparisons of smoothness provide a basis for measuring data quality. Third, we outline a process for re-smoothing the raw data in a manner that preserves the maximum amount of true signal within that data.  Finally, we illustrate the process for comparing stochastic volatility and affine models of the term structure.

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In an article in August of 2014, we focused on one of the most persistently used formulas in fixed income markets:

Credit Spread = (1 – Recovery Rate)(Default Probability)

One is barraged on a daily basis with press and internet commentary using default probabilities “implied” from credit spreads. This simple formula asserts that the credit spread on a credit default swap or bond is simply the product of the issuer’s or reference name’s default probability times one minus the recovery rate on the transaction.

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The author wishes to thank his colleague, Managing Director for Research Prof. Robert A. Jarrow, for twenty-one years of guidance and helpful conversations on this critical topic.

The U.S. Treasury yield curve is a critical input to the risk management calculations of major banks, insurance firms, fund managers, pension funds, and endowments around the world. This note presents an updated 10 factor no arbitrage model of the U.S. Treasury yield curve using the Heath, Jarrow and Morton [1992] framework for the period from January 1962 through September 2016.

The U.S. Treasury history made available by the U.S. Department of the Treasury begins on January 2, 1962. While the U.S. Treasury does not report any negative rates during this period, the wide variation in U.S.

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A recent conversation with Prof. Edward Kane of Boston College and today's news that Royal Bank of Scotland PLC had the most actively traded bond in the US of any European Union issuer prompted us to open up the Kamakura Corporation archives from the credit crisis.

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A Case Study of Yingli Solar Using KRIS Default Probabilities
May 19, 2016

The objective of this write-up is to showcase how the Kamakura Risk Information Services (“KRIS”) default probabilities subscription service assists users to manage exposure ingress and egress based on Kamakura Default Probabilities (“KDP”) movements.

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