HONOLULU, February 12, 2003: Kamakura Corporation announced today that version 4.3 of the Kamakura Risk Manager integrated credit risk, market risk and asset and liability management risk management software system has been released to clients worldwide. KRM version 4.3 allows defaults to be simulated on a multiperiod basis for every counterparty ranging from retail borrowers to major multi-national corporations and sovereigns. Since most commercially available credit risk systems implicitly assume that there is only one period in the analysis, the new KRM version offers significantly greater accuracy in credit risk management, default-adjusted value at risk, default adjusted net income simulation, and default-adjusted cash flow generation The multi-period KRM framework is essential to correct valuation and risk assessment of collateralized debt obligations or any other balance sheet with a large number of counterparties and a complex liability structure. KRM version 43 also allows for fully distributed monte carlo simulation, and as a result more than 10 percent of Kamakura's client base is now processing more than one million transactions daily.
The new version of Kamakura Risk Manager incorporates both reduced form credit models for estimating default probabilities and the older Merton structural models of default. Kamakura Corporation, which announced October 30 that it is providing default probabilities commercially, is the first default probability vendor to offer for sale the same software it uses to generate its default probabilities. Using Kamakura Risk Manager, Kamakura clients have the option to use Kamakura's KRIS-cr default probabilities or to generate their own default probabilities for the counterparties they face
Other enhancements to KRM include a complete volatility smile capability for all fixed income, foreign exchange and equity options; foreign exchange-linked swaps; logistic regression and maximum likelihood estimation for consumer and small business credit assessment; monte-carlo based default on a multi-period basis when using transition matrices; complex formula-driven interest rate payment indices; credit model-based yield curve generation; convertible bond valuation using binomial trees; FAS 91 and 115-compliant amortization of premiums and discounts, calculation of prepayment "break costs" for transfer pricing of consumer loan prepayments; and a rich array of new reporting, data management, and table editing capability.
"Kamakura's clients from Germany to the U.S., from Australia to Korea, are driving Kamakura's innovation," said Dr. Donald R. van Deventer, Kamakura Chairman and Chief Executive Officer. "Basel II and best practice in shareholder value creation require the kind of multi-period credit risk management capabilities that we have launched in KRM version 4.3. We believe that the integration of credit risk with market risk, ALM and transfer pricing is now completely seamless and that the era of 'silo' risk systems is at an end. We applaud our clients whose vision has brought this about."