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Kamakura Releases Proprietary Credit Risk Research Linking Default Probabilities and Credit Spreads

Technical Guide Released for Basel II Purposes to KRIS Clients

HONOLULU, May 30, 2006: Kamakura Corporation announced today that it has released proprietary research linking default probabilities and credit spreads to clients of its Kamakura Risk Information Services (“KRIS”) default probability and correlation service. Kamakura added implied credit default swap rates for maturities from 1 year to 10 years to its KRIS service in January for 16,000 companies in 29 countries. The research released today provides “full disclosure” documentation of the credit spread calculation, as required by the Basel Committee on Banking Supervision in its “Basel II” capital accords.

“For many years market participants used the simple assumption that credit default swap quotes were simply one minus the recovery rate times the default probability,” said Warren Sherman, Kamakura President and Chief Operating Officer. “The reality of the market place is that credit spreads contain a large premium in excess of the ‘credit loss component’ of credit spreads, as many many researchers have established. Kamakura’s proprietary research on this linkage is based on more than 500,000 observed credit default swap quotes and the attributes of the underlying reference names on the CDS. The research makes it explicit what macro-economic factors and company attributes drive the risk premium above and beyond the default probabilities of the company involved.”

Kamakura has summarized the research in Appendix D of the KRIS 4.1 Technical Guide and made it available to clients of the KRIS service. Five Kamakura executives, led by Dr. Robert Jarrow, Leonard Matz, and Dr. Donald R. van Deventer, are co-authors of the credit spread research. The technical guide contains a complete description of all of the explanatory variables driving credit spreads, along with the relevant coefficients and statistical significance of each contributor.