KRIS-yc: Kamakura Risk Information Services, Yield Curve Data

Kamakura Corporation provides the world’s most sophisticated market participants with both financial information and risk management software. The financial information supplied by Kamakura Corporation is produced by the Kamakura Risk Manager system which is used by financial institutions with assets ranging from $3 billion to $1 trillion in eight countries around the world for credit risk, market risk, VAR, and asset and liability management.

The Kamakura Risk Information Services data is available for purchase by corporations, financial institutions, and universities who are not competitors of Kamakura Corporation in the risk management software and information business. Inquiries from value-added resellers of the data are welcome. To place an order for Kamakura Risk Information Services (KRIS) data, please see “Placing an Order” below.

To order sample KRIS data please e-mail sales@kamakuraco.com.

Using KRIS Data

Kamakura Risk Information Services data is essential to achieving maximum risk-adjusted return for shareholders. Five simple examples show how critical this information can be in achieving maximum shareholder value:

•  Bankers using the service will be able, for the first time, to measure the historical credit spreads of the bank’s lending products covering diverse areas like auto loans, home equity loans, mortgage loans, and small business loans regardless of whether the loan is amortizing or has all principal repaid at maturity. A bank with historical data on its three year auto loan rate, for example, can simply compare the coupon on its auto loans with the equivalent coupon from the Kamakura Risk Information Service on a U.S. Treasury security with the same maturity and amortization, for origination on the same day as the auto loan rate.
•  Investment managers with historical data on corporate or municipal bond yields will also be able to more accurately compare those yields to a more precisely matching maturity U.S. Treasury yield curve to calculate the historical credit spread on the bonds.
•  Actuaries who have historical data on cash flows from insurance policies can retroactively calculate the total return spread (versus U.S. Treasuries) on those policies based on the bond yields and prices from the Kamakura Risk Information Service.
•  Derivatives dealers can use the zero coupon bond prices, forward rates, and zero coupon bond yields to calculate historical interest rate volatilities to benchmark fixed income options pricing
•  Academic researchers can test relative performance of smoothing methods and relative performance of term structure models over the sample period.

KRIS Data Series

The Kamakura Risk Information Service data library currently includes a total of 66 data series based on United States Treasury Bond constant maturity yields reported by the Federal Reserve Board in its H15 statistical release. Custom data series can be created upon request. The following standard data series are available for purchase from KRIS for each of six smoothing methods:

Monthly Par Coupon Bond Yield Curves
Data frequency: Daily from January 4, 1982
Maturity range: Maximum maturity 31 years
Maturity intervals: Monthly
Payment frequency: Monthly

Quarterly Par Coupon Bond Yield Curves
Data frequency: Daily from January 4, 1982
Maturity range: Maximum maturity 31 years
Maturity intervals: Quarterly
Payment frequency: Quarterly

Semi-annual Par Coupon Bond Yield Curves
Data frequency: Daily from January 4, 1982
Maturity range: Maximum maturity 31 years
Maturity intervals: Semi-annual
Payment frequency: Semi-annual

Monthly Amortizing Par Coupon Bond Yield Curves
Data frequency: Daily from January 4, 1982
Maturity range: Maximum maturity 31 years
Maturity intervals: Monthly
Payment frequency: Monthly

Quarterly Amortizing Par Coupon Bond Yield Curves
Data frequency: Daily from January 4, 1982
Maturity range: Maximum maturity 31 years
Maturity intervals: Quarterly
Payment frequency: Quarterly

Semi-annual Amortizing Par Coupon Bond Yield Curves
Data frequency: Daily from January 4, 1982
Maturity range: Maximum maturity 31 years
Maturity intervals: Semi-annual
Payment frequency: Semi-annual
 

Semi-annual Forward Rates
Data frequency: Daily from January 4, 1982
Maturity range: Maximum maturity 31 years
Maturity intervals: Semi-annual

Zero Coupon Bond Prices
Data frequency: Daily from January 4, 1982
Maturity range: Maximum maturity 31 years
Maturity intervals: Quarterly

Zero Coupon Bond Yields
Data frequency: Daily from January 4, 1982
Maturity range: Maximum maturity 31 years
Maturity intervals: Quarterly

Smoothing Techniques Available in KRIS Data

Each of the data series above is available for six different yield curve smoothing methods that are incorporated in the Kamakura Risk Manager software. These methods are fully documented in Kamakura’s van Deventer, Imai and Mesler’s Advanced Financial Risk Management (2004) Chapters 8 and 18.  KRIS customers can order series produced by any one of these methods or any number of the methods. Kamakura recommends the maximum smoothness forward rate technique (see Journal of Fixed Income, September 1994, as revised in Chapter 2 of Financial Risk Analytics, for the performance of the maximum smoothness forward rate technique relative to other smoothing approaches).

•  Maximum Smoothness Forward Rate Approach. This approach produces the smoothest possible continuous forward rates consistent with observable coupon bearing bond prices, subject to the constraint that the first derivative of the forward rate curve is zero at the longest observable maturity point. The proof that there is no smoother forward curve is given in Chapter 2, Financial Risk Analytics.

•  Cubic Spline of Zero Coupon Bond Yields (y’=0). This approach produces the smoothest possible continuous zero coupon bond yields consistent with observable coupon bearing bond prices, subject to the constraint that the first derivative of the zero coupon bond yield curve is zero at the longest observable maturity point.

•  Cubic Spline of Zero Coupon Bond Yields (y” =0). This approach produces the smoothest possible continuous zero coupon bond yields consistent with observable coupon bearing bond prices, subject to the constraint that the second derivative of the zero coupon bond yield curve is zero at the longest observable maturity point.
•  Cubic Spline of Zero Coupon Bond Prices (y’=0). This approach produces the smoothest possible continuous zero bond prices consistent with observable coupon bearing bond prices, subject to the constraint that the first derivative of the zero coupon bond yield curve is zero at the longest observable maturity point.
•  Cubic Spline of Zero Coupon Bond Prices (p”=0) This approach produces the smoothest possible continuous zero bond prices consistent with observable coupon bearing bond prices, subject to the constraint that the second derivative of the zero coupon bond price curve is zero at the longest observable maturity point.
•  Linear Smoothing of Zero Coupon Bond Yields. This approach uses linear smoothing to interpolate zero coupon bond yields at key “knot” points. Kamakura does not recommend this approach but makes this data available because the method is common among market participants.

Pricing of KRIS Data Series

Historical data for the KRIS data series is available for purchase by corporations, financial institutions, and universities who are not competitors of Kamakura Corporation in the risk management software and information business. Inquiries from value-added resellers of the data are welcome. Prices for the historical data are available from sales@kamakuraco.com or Kamakura's Head Office (1-808-791-9888).

Academic Research Grants

Kamakura Corporation will award an academic research grant equal to $5000 in total (split evenly among co-authors) to authors of articles in established academic journals which cite Kamakura Corporation as the source of the data used. Academic research grants to authors (an their co-authors) of a subscribing university will not exceed 50% of that university’s KRIS subscription price. Awards will be granted on a first come, first served basis. Kamakura’s Managing Director of Research Professor Robert A. Jarrow will be responsible for the determination of which journals qualify as “established academic journals.”

Data Format

Data is made available to clients in either Oracle or text files. There are six data fields in this data base. The fields are the date, an identifier for the yield curve type (i.e. U.S. Treasury Constant Maturity), yield curve data format of the input data, a code for the yield curve smoothing method used, the maturity of the observation in decimal years, and the value (yield, price or forward rate). This format is a standard format of the Kamakura Risk Manager system and can be used with KRM for viewing and reporting without modification.

Placing an Order

Please send us an email at sales@kamakuraco.com. Kamakura will send you an electronic copy of the Kamakura Risk Information System contract, which contains a form for the selection of the desired data series. Payment for data series occurs prior to electronic transmission of data to clients.

For further information please contact

Kamakura Risk Information Services Department
Kamakura Corporation
2222 Kalakaua Ave.
Suite 1400
Honolulu, HI 96815
Telephone: 1-808-791-9888
Facsimile: 1-808-791-9898
e-mail: sales@kamakuraco.com

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