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 About Donald

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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An Introduction to Derivative Securities, Financial Markets, and Risk ManagementAdvanced Financial Risk Management, 2nd ed.

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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
Managing Director, ASPAC
Phone: +65.6818.6336

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Andrew Cowton
Managing Director
Phone: +61.3.9563.6082

Europe, Middle East, Asia
Jim Moloney
Managing Director, EMEA
Phone: +49.17.33.430.184

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Kamakura Blog

  

Today’s fraud charges by the State of New York against former Bank of America CEO Ken Lewis prompted me to think about how people have tolerated the last three years of crisis, particularly risk management experts.  That’s the subject of today’s post.

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This quote has been added to our May 22, 2009 "Great Quotations" blog entry, but it hits so close to home we repeat it here.

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In part 10 of this series on yield curve smoothing, we included the maximum smoothness forward rate approach in our comparison of 23 different smoothing techniques, both in terms of smoothness and “tension” or length of the resulting forward and yield curves.  In each of our worked examples, we showed how to derive unique forward rate curves and yield curves based on the same set of sample data.  This sample data assumed that we had observable zero coupon yields or zero coupon bond prices to use as inputs.  At most maturities, this will not be the case and the only observable inputs will be coupon-bearing bond prices.  In this post, we show how to use coupon-bearing bond prices to derive maximum smoothness forward rates and yields.  The same approach can be applied to the 22 other smoothing techniques summarized in Part 10 of this series.

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Over the three day Martin Luther King holiday in the USA, another event took place in Santiago that brought a smile to my face.  This blog is an appreciation of one of my favorite people, Sebastián Piñera, newly elected President of Chile.

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In the first 10 installments of this series on yield curve smoothing, we committed the most common sin there is in the yield curve smoothing literature.  We used one set of “made up” data instead of hundreds or thousands of real data points to judge the performance of yield curve smoothing techniques.  In this blog, we explain why the test proposed by David Shimko is essential to judging the accuracy and realism of yield curve smoothing techniques.  We dust off some old yield data from the attic to illustrate how the test works.

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