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Kamakura Corporation

Kamakura Launches New Default Probability Service For Basel II, Announces First Client
World's First Multiple Models Service Is Compatible With KRM Risk System

New York (ots)

The Kamakura Corporation announced its launch of
the world's first information service with default probabilities from
multiple models including structural credit models and the new
reduced form credit models. Honolulu-based Kamakura made the
announcement yesterday at their New York Credit Risk Conference which
was attended by more than 200 industry experts. Kamakura told the
conference that it has already signed its first major US client and
has begun delivery of the service for all listed US companies. Daily
production of default probabilities begins November 4, 2002.
"The New Basel Capital Accord requires banks to provide their
regulators with quantitative measures of model performance," said Dr
Donald van Deventer, President and CEO of Kamakura Corporation.
"Kamakura's default probability service provides an objective and
consistent way of assessing model performance. All of our default
probabilities come from a single source with common data sets over
comparable time periods. Clients also have the option to purchase the
functions and parameters that determine the default probabilities.
This is a level of transparency never before offered but will greatly
benefit the increasing number of clients who want complete
transparency in the default probabilities they use."
Kamakura announced results based on more than 1 million
observations of public companies over the 1963-2002 time period in
the United States. The default database contains more than 20 times
the number of observations used by major rating agencies and was
compiled under the direction of Professor Robert Jarrow, Kamakura's
Managing Director of Research.
"Our results indicate that reduced form models based on credit
derivatives prices and bond prices have the best performance from
both a statistical and a practical point of view," said Professor
Jarrow. "When we fit the reduced form models to 40 years of monthly
data on all US listed companies, there is no doubt that accounting
and equity data in combination perform better than models based
solely on equity prices" he said. "Macroeconomic factors like
interest rates, exchange rates and commodity prices are also
significant drivers of default. When the default probability is
explicitly linked to macroeconomic factors, financial institutions
can explain the causes of correlated default and the correlations
with market risk. The potential for the waves of default we have seen
recently in the U.S. is much more clear."
Kamakura uses its own enterprise-wide risk management software
Kamakura Risk Manager to derive the default probabilities. The fully
integrated credit risk, market risk, and asset and liability
management KRM system has incorporated the Jarrow reduced form credit
models since May, 2000. KRM's new default probabilities include those
from three reduced form credit models, an advanced Merton credit
model and a hybrid reduced form credit model with Merton default
probabilities as an input.
The first client for Kamakura's new default probability service is
a prestigious New York institution which began taking delivery of
default probabilities last month.
About Kamakura Corporation
Kamakura Corporation is a leading provider of risk management
information, processing and software. Kamakura is the first company
in the world to develop and install a fully integrated credit risk,
market risk, asset and liability management, and transfer pricing
system. Kamakura has more than 40 clients ranging in size from $3
billion in assets to $1 trillion in assets. Kamakura's risk
management software is currently used in the United States, Germany,
Canada, Mexico, Japan, Australia, Korea, and Hong Kong.
Kamakura's research effort is led by Professor Robert Jarrow, who
was named Financial Engineer of the Year in 1997 by the International
Association of Financial Engineers. Kamakura management has published
seven books and more than 100 publications on credit risk, market
risk, and asset and liability management. Kamakura has world-wide
distribution alliances with IPS-Sendero and Unisys, making Kamakura
products available in almost every major city around the globe.

Contact:

Kamakura Corporation
2800 Woodlawn Drive, Suite 138, Honolulu, Hawaii 96822
Telephone: +1-808-539-3830
Facsimile: +1-808-539-3748
Information: info@kamakuraco.com
Web site: www.kamakuraco.com

Amit Matta
Kamakura Corporation
Vice President
Phone: +1 212-254-1155
Email: amatta@kamakuraco.com
URL: http://www.kamakuraco.com