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

 Blog Entries

Kamakura Corporation Named to World Finance 100

July 30, 2014
American International Group Inc. Bonds:
A Reward to Risk Ratio Twice as High as the Median Bond Issue


July 29,2014
AT&T Inc. Bonds: Ten Times the Risk of IBM and Below Average Value

July 22, 2014
International Business Machines: An Updated Bond Market Ranking

July 16, 2014
Transocean Ltd. Bonds: High Risk, Low Return

July 15, 2014
The Walt Disney Company Bonds: Very Low Default Risk at a “No Brand” Price

July 15, 2014
Brazil, Italy, Spain, Credit Default Swaps and the
European Commission Short Sale Ban, 2010-2014


July 14, 2014
Bank of America and MBIA Lead U.S. Bank Credit Default Swap Trading Volume, 2010-2014

July 12, 2014
Banco Santander, S.A. Tops International Bank
Credit Default Swap Trading Volume, 2010 to 2014


July 11, 2014
Forward Fixed Rate Mortgage Yield Jumps 0.06% and Value of Mortgage Servicing Rights Drops This Week

July 10, 2014
J. C. Penney Leads Non-Bank Corporate Credit Default Swap Trading Volume

July 9, 2014
CDS Trading Volume for 1,206 Reference Names
For 207 Weeks Ended June 27, 2014


July 8, 2014
Hewlett-Packard Company Bonds: Default Risk Continues to Drop

July 3, 2014
Forward 1 Month T-Bill Rates Reverse Last Week’s Declines, Plateau Between 3.70% and 3.72% from 2021 to 2024

July 1, 2014
Kraft Foods Group Inc. Bonds: Under-rated, Low Risk and Solid Value

March 19, 2014
Stress Testing and Interest Rate Risk Models: A Multi-Factor Stress Testing Example

March 13, 2014
Stress Testing: A Credit Spread Ranking of 12 U.S. and 12 International Banks

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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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