HONOLULU, February 10, 2005: Kamakura Corporation announced today that it has dramatically expanded the number of default probability correlations offered on its Kamakura Risk Information Service. Kamakura now offers 896 million correlations between the default probabilities of all possible pairs of companies formed from its 16,000 company KRIS default probability service. The KRIS default probability service, which spans 23 countries, includes correlations for default probability maturities of 1 month, 3 months, 6 months, 1 year, 2 years, 3 years and 5 years. Kamakura is the only firm offering pair-wise default probability correlations, which are essential to accurate pricing and valuation of collateralized debt obligations, first to default swaps, and loan portfolios. Kamakura's Robert Jarrow and Donald R. van Deventer are featured in the January 2005 issue of RISK Magazine on the correlation issue.
"Credit market participants have become acutely aware of the dangers of using equity correlations or of assuming all pair-wise correlations among a group of companies are constant," said Warren Sherman, Kamakura President and Chief Operating Officer. "Wall Street is enormously skilled at arbitraging clients using these assumptions instead of an accurate correlation of the default probabilities themselves. Jarrow and van Deventer's paper in RISK further shows how these default probability correlations are directly related to correlations in the actual events of default. We have been gratified at the world-wide response to Kamakura's default correlation service and we look forward to continuing expansion"
Kamakura is offering free trials of its KRIS default probability and correlation service to qualified institutions. For more information on Kamakura's free trial offer please contact Kamakura. More information can also be found on the Kamakura Corporation web site and in Advanced Financial Risk Management (John Wiley & Sons, 2004) by Kamakura's van Deventer, Kenji Imai, and Mark Mesler. Advanced Financial Risk Management was recently named "best finance book of 2004" on riskbook.com.