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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
2222 Kalakaua Avenue

Suite 1400
Honolulu HI 96815

Phone: 808.791.9888
Fax: 808.791.9898
info@kamakuraco.com

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James McKeon
Director of USA Business Solutions
Phone: 215.932.0312

Andrew Zippan
Director, North America (Canada)
Phone: 647.405.0895
 
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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: +49.17.33.430.184

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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Today’s forecast for U.S. Treasury yields is based on the April 15, 2010 constant maturity Treasury yields reported by the Board of Governors of the Federal Reserve System in its H15 Statistical Release reported at 4:15 pm April 16, 2010.  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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It is our pleasure, per the message below, to pass along this invitation to clients and friends of Kamakura Corporation to participate in the Credit Magazine European Awards poll.

Donald R. van Deventer
Kamakura Corporation
April 12, 2010

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Today’s forecast for U.S. Treasury yields is based on the April 8, 2010 constant maturity Treasury yields reported by the Board of Governors of the Federal Reserve System in its H15 Statistical Release reported at 4:15 pm April 9, 2010.  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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In part 10 of this series on yield curve smoothing, we showed why the maximum smoothness forward rate approach is superior to the wide range of alternative smoothing methods we have introduced in this series, including the deeply flawed Nelson-Siegel approach.  In part 12 of this series, we showed that using bond prices as inputs to the smoothing process is a modest extension to the smoothing we did in part 10. In this blog, we show that it is incorrect, sometimes disastrously so, to apply smoothing to a yield curve for an issuer with credit risk, ignoring the risk free yield curve.  We show alternative methods for smoothing the zero coupon credit spread curve, relative to the risk free rate, to achieve far superior results.  Smoothing a curve for an issuer with credit risk without reference to the risk free curve is probably the biggest mistake one can make in yield curve smoothing and we show why below.
 

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Kamakura Corporation is very pleased to report that we have substantially expanded our relationship with the team at Thomson Reuters.  Thomson Reuters began distributing a small subset of the Kamakura Risk Information Services default probabilities in 2009.  Beginning next week, KRIS default probabilities for the 1,700 public firms with traded credit default swaps will be available on the Reuters 3000 Xtra service, along with KRIS sovereign default probabilities for 100 countries.  This expanded service will allow subscribers to the Reuters 3000 Xtra service to make daily comparisons between credit default swap quotations from Reuters and Markit with the KRIS default probabilities.  This allows investors to make a fully informed judgment about whether the risk premiums implicit in CDS spreads are sufficiently high to induce the investor to provide credit protection on that corporate or sovereign credit.
 

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