Chartis Research Report Ranks Kamakura Risk Manager (Fiserv KRM) Number 1 in the World July 23, 2010 Friday Forecast: 10 Year Forecast of U.S. Treasury Yields And U.S. Dollar Interest Rate Swap Spreads Kamakura Blog: Fixed Income Performance Attribution July 16, 2010 Friday Forecast: 10 Year Forecast of U.S. Treasury Yields And U.S. Dollar Interest Rate Swap Spreads
Kamakura Blog: The Links between CDS Spreads and Default Probabilities More...
President Obama’s pay czar Kenneth Feinberg has a daunting task. He has to intervene and override “market forces” to establish “fair pay” for the CEOs of major institutions that are reliant on government support for their survival. The difficulty in this process is a simple fact: football coaches are paid for their skill, but large company CEOs are not. Large company CEOs, with a few exceptions, are winners of a lottery that entitles them to huge payouts during their brief tenure. On behalf of the shareholders, the Boards of Directors of these firms have to do a better job of separating luck from skill. Read More »
President Obama’s pay czar Kenneth Feinberg has a daunting task. He has to intervene and override “market forces” to establish “fair pay” for the CEOs of major institutions that are reliant on government support for their survival. The difficulty in this process is a simple fact: football coaches are paid for their skill, but large company CEOs are not. Large company CEOs, with a few exceptions, are winners of a lottery that entitles them to huge payouts during their brief tenure. On behalf of the shareholders, the Boards of Directors of these firms have to do a better job of separating luck from skill.
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In Part 6 of our series on the basic building blocks of yield curve smoothing, we learn from our results in Part 5 (linear forward rates). We found in Part 5 that, for forward rates to be continuous and linear, we induced too much of a saw-tooth pattern in forward rates, even though the yields implied by these forward rates looked reasonable. In this post, we turn to Example D, in which we seek to “take the teeth out of the saw tooth pattern” by requiring that the first derivatives of the curve segments we fit be equal at the knot points. We use a quadratic spline of yields to achieve this objective, and we optimize to produce the “maximum tension/minimum length” yields and forwards consistent with the quadratic splines. Finally, we compare the results to the popular but flawed Nelson-Siegel approach and gain still more insights on how to further improve the realism of our smoothing techniques. Read More »
In Part 6 of our series on the basic building blocks of yield curve smoothing, we learn from our results in Part 5 (linear forward rates). We found in Part 5 that, for forward rates to be continuous and linear, we induced too much of a saw-tooth pattern in forward rates, even though the yields implied by these forward rates looked reasonable. In this post, we turn to Example D, in which we seek to “take the teeth out of the saw tooth pattern” by requiring that the first derivatives of the curve segments we fit be equal at the knot points. We use a quadratic spline of yields to achieve this objective, and we optimize to produce the “maximum tension/minimum length” yields and forwards consistent with the quadratic splines. Finally, we compare the results to the popular but flawed Nelson-Siegel approach and gain still more insights on how to further improve the realism of our smoothing techniques.
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