Press Release

Newest Version of Kamakura Risk Information Services
Sovereign Default Probabilities Released to KRIS Clients

KRIS Sovereign Default Service 1-year default probability for Greece (blue) versus default probabilities for Attica Bank SA (red), National Bank of Greece (green), and Eurobank Ergasias (orange).

NEW YORK, October 4, 2016: Kamakura Corporation announced Tuesday that KRIS version 6.0 sovereign default probabilities are now available to clients on the Kamakura Risk Information Services web site and via file download. The KRIS sovereign default service default probabilities, first announced by Kamakura on May 19, 2008, are the world's first commercially available quantitative sovereign default probabilities. The sovereign default probability service is seamlessly integrated with the KRIS public firm default probabilities, first offered in October 2002. The new version of the Kamakura sovereign default probabilities was developed under the direction of Kamakura Managing Director Prof. Robert A. Jarrow and implemented by the KRIS modeling team, which averages two decades each of big data statistical modeling of defaults of all types.

The sovereign default date base spans the period from January 1980 to December 2015. The total number of monthly observations was 56,161 with 128 defaulting observations. The model combines sovereign financial statistics with macro-economic factors and political risk factors in predicting default. The KRIS version 6.0 sovereign default model recognizes the close links between the health of a country’s financial sector and sovereign default risk, based on experience in countries like Greece, Ireland, Japan, Thailand, Korea and other countries. The KRIS version 6.0 sovereign default model also incorporates foreign exchange rates as a key macro factor that is statistically significant in predicting sovereign default. The “event of default” in the Kamakura sovereign default data base recognizes the strong trends toward a standardized “cross default” practice in the sovereign sector, where it is not as common as it is in the private sector. The KRIS sovereign default flag defines “failure” as the first to occur of the following events:

  • Country is in arrears on interest by the definition of the World Bank
  • Country is in arrears on principal by the definition of the World Bank
  • Country is in arrears on loans from the International Monetary Fund
  • Country is in the process of restructuring debts with external creditors
  • Country has failed to pay its scheduled debt to external creditors
  • Country has proactively declared itself to be in default unilaterally
  • Country is rated D or SD by a major rating agency
  • Country paper currency is no longer accepted in domestic business transactions and the country’s economy functions using a third party currency, either informally or officially (as in Zimbabwe and Ecuador)
  • Country has been declared an event of default and listed as a defaulter in the “credit event” list of the International Swaps and Derivatives Association, Inc. (ISDA), the rule-setting body for the credit default swaps market.
  • Country ‘event of default’ vote was conducted by ISDA and, despite the outcome of the determination committee vote, it is clear that the same events in the corporate sector would have been declared an event of default. A recent example is the case of Ireland in which the holders of Irish bonds were involuntarily subordinated to the bail-out funds. 

The default probabilities for 180 countries are updated daily and have a term structure of default probabilities out to three years. The default probabilities are derived from a series of logistic regressions which produce default probabilities of the modern "reduced form" type, rather than the legacy Merton-style default probabilities whose performance has been called into question in an extensive series of papers by Bharath and Shumway [2008] and Campbell, Hilscher and Szilagyi [2008, 2011].

"Kamakura’s clients have been strongly encouraging a revision in the KRIS sovereign default model, and we believe that they will be extremely pleased with the accuracy and market sensitivity of this new version. Our clients recognize that big data statistical methods regularly outperform `expert systems’ like legacy rating agency credit committees. Prof. Gary King of Harvard and Prof. Samir Soneji of Dartmouth made this very point in their big data analysis of the Social Security Administration in 2012. Beside superior accuracy, the ability to use default probabilities with an explicit maturity, updated daily, in a fully integrated enterprise-wide risk management system like Kamakura Risk Manager is essential to our most sophisticated clients." said Martin Zorn, Kamakura President and Chief Operating Officer."

The KRIS Sovereign Default Service, Version 6.0, is delivered with a proprietary Kamakura Risk Information Services Technical Guide. The Technical Guide contains an extensive array of tests of the sovereign model's in-sample and out-of-sample performance that are designed to achieve "best practice" status for model testing under the highest standards of corporate governance in the Basel III era. For more information on the KRIS sovereign default service, please contact Kamakura at

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About Kamakura Corporation
Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura was named to the World Finance 100 by the Editor and readers of World Finance magazine in 2012. In 2010, Kamakura was the only vendor to win 2 Credit Magazine innovation awards. Kamakura Risk Manager, first sold commercially in 1993 and now in version 8.1, is the first enterprise risk management system with users focused on credit risk, asset and liability management, market risk, stress testing, liquidity risk, counterparty credit risk, and capital allocation from a single software solution. The KRIS public firm default service was launched in 2002. The KRIS sovereign default service, the world’s first, was launched in 2008, and the KRIS non-public firm default service was offered beginning in 2011. Kamakura added its U.S. Bank default probability service in 2014. Kamakura has served more than 330 clients ranging in size from $1.5 billion to $1.6 trillion in assets. Kamakura’s risk management products are currently used in 43 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, South America, Australia, Japan, China, Korea, India and many other countries in Asia.

Kamakura has world-wide alliances with Fiserv ( and SCSK Corporation ( making Kamakura products available in almost every major city around the globe.

For more information contact
Kamakura Corporation
2222 Kalakaua Avenue, Suite 1400, Honolulu, Hawaii 96815
Telephone: 1-808-791-9888
Facsimile: 1-808-791-9898
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