KRIS is the only default probability and fixed income system which provides daily cross-validation between default probabilities, bond price & spread. KRIS default probability background is given here:
We use the reduced form bond pricing model of Hilscher, Jarrow and van Deventer to price the bonds of every issuer in the U.S. corporate bond market that has at least 2 senior non-call fixed rate bond issues that had trade volume of $1 million or more each:
We compare KRIS bond pricing accuracy to a naïve model based on legacy credit ratings, using the best fitting credit spread levels for each rating grade. Today’s pricing accuracy comparison is shown below:
The trends in pricing error since September 1, 2017 are shown in this graph:
Finally, the day by day, bond by bond accuracy “win” percentage for KRIS versus ratings is presented here:
For more on the extensive model validation process followed in all aspects of Kamakura Corporation risk management products, please contact us at firstname.lastname@example.org.