HONOLULU, April 15, 2004: Kamakura Corporation released a new publication today that reports the performance of Kamakura Risk Information Services default probability models as required by the New Capital Accord of the Basel Committee on Banking Supervision ("Basel II," April 2003) The new publication, authored by Kamakura's Professor Robert A. Jarrow and Dr. Donald R. van Deventer, is entitled "Practical Use of Credit Risk Models in Loan Portfolio and Counterparty Exposure Management: An Update" and is available on the research page (paper # 73) of the Kamakura web site. The paper is forthcoming in Credit Risk: Models and Management, second edition, from Risk Publications.
Dr. van Deventer, Kamakura Chief Executive Officer, noted "Basel II in Sections 382-383 is very clear about credit models used to derive default probabilities: 'Use of a model obtained from a third-party vendor that claims proprietary technology is not a justification for exemption from documentation or any other of the requirements for internal ratings systems. The burden is on the model's vendor and the bank to satisfy supervisors'." Dr. van Deventer continued, "By releasing model performance results for Kamakura's KRIS version 3.0, Kamakura is demonstrating its compliance with Basel II in each of the aspects required in Sections 376-383 and 463-467 of the New Capital Accord. Just as importantly, we are proposing that nave models' performance be used to set minimum Basel II credit model performance standards. Our results show that older credit models fail to meet this minimum performance standard, consistent with the conclusions of many who have replicated our results using their own data sets."
The test results released by Kamakura demonstrate model performance in each of the dimensions required by the Basel II Accords. First, they show superior performance in the ranking of companies by riskiness, far in excess of the minimum performance floor of nave models. Second, they show superior and consistent performance through the entire credit cycle, as Basel II requires. Finally, they meet the test proposed by Andrew Boral and Eric Falkenstein, a consistency of actual and expected defaults for all levels of default probabilities. Kamakura is making the full results of its performance tests and its full default data base available to regulators world-wide for independent verification of its results.
Kamakura Corporation reported Monday that the Kamakura troubled company index ended the month of December at 6.42%, an increase of 1.31% from the end ...View article
Kamakura Troubled Company Index Increases 0.30% to 4.66% from August 31 Kamakura Corporation reported Tuesday that the Kamakura troubled company...View article
J. P. Morgan Asset Management has released an important fixed income strategy study by Managing Director Douglas Niemann that features Kamakura Risk I...View article