SOURCE: Kamakura Corporation

March 21, 2006 10:00 ET

Kamakura Adds Implied Ratings for 16,000 Public Companies to KRIS Default Probability and Correlation Service

HONOLULU, HI -- (MARKET WIRE) -- March 21, 2006 --Kamakura Corporation announced today that it has added implied debt ratings on 16,000 public companies in 29 countries to its Kamakura Risk Information Services default probability and default correlation service. The addition of ratings brings the number of default methodologies on the KRIS web site to five. In addition to ratings, the KRIS default probability service includes the fourth generation and third generation Jarrow-Chava "reduced form" default models, a hybrid default model which adds the Merton default probability as an input, and the Kamakura Merton default technology. Kamakura's web site now includes implied ratings for 10 times more companies among these 16,000 firms than the rating agencies themselves cover with a formal debt rating.

"Rating agencies incur a very significant 'change cost' when it comes to ratings upgrades and downgrades, which makes ratings changes very infrequent," said Warren Sherman, Kamakura President and Chief Operating Officer. "Citigroup, for example, has had the same rating since 1997 in one of the most turbulent economic periods in U.S. history. KRIS users now have access to a daily-updated rating on 16,000 companies which takes into account the behavior of one of the two major rating agencies over the last 15 years. The analysis of ratings behavior, which is documented in an appendix to the KRIS 4.1 Technical Guide, shows that the KRIS reduced form default probability term structure, company size and macro economic factors are the key predictive variables in explaining rating agency behavior."

The expanded KRIS service now includes the full probability distribution of potential ratings for all public companies on KRIS, as well as a "most likely" rating and the probability of being "not rated." The uncertainty in rating agency behavior is attributable to the long periods of stability in ratings during times of great changes in default probabilities, financial ratios, stock price inputs, and macro economic factors. As noted in a March 15, 2006 press release from Kamakura Corporation, the Kamakura version 4.1 default probabilities have a 99.00% accuracy in predicting default of rated public companies. This ROC accuracy ratio is well above that of public debt ratings at any time horizon. This accuracy differential also contributes to the uncertainty in rating agency behavior. The probability of being "not rated" or "rated" is based on 2.2 million monthly observations in the KRIS default database from January 1990 to the present. The predicted rating, conditional on being rated, is based on 263,000 monthly observations of public debt ratings over the same time period.

Kamakura is offering free trials of its KRIS default probability and default correlation service to qualified institutions. For more information on Kamakura's free trial offer please contact Kamakura at 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 (available on "Advanced Financial Risk Management" was recently named "best finance book of 2004" on

About Kamakura Corporation

Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura has been a provider of daily default probabilities and default correlations for listed companies since November 2002. Kamakura launched its business mortality model for unlisted companies in January 2004. Kamakura is also the first company in the world to develop and install a fully integrated credit risk, market risk, asset and liability management, and transfer pricing software system. Kamakura has clients ranging in size from $3 billion in assets to $1.6 trillion in assets. Kamakura's risk management products are currently used in 19 countries, including the United States, Canada, Germany, the Netherlands, France, Switzerland, the United Kingdom, Eastern Europe, the Middle East, Africa, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura's research effort is led by Professor Robert Jarrow, who was named Financial Engineer of the Year in 1997 by the International Association of Financial Engineers. Professor Jarrow and Dr. van Deventer were both named to the 50 member RISK Hall of Fame in December 2002. Kamakura management has published twenty-one books and more than 100 publications on credit risk, market risk, and asset and liability management. Kamakura has world-wide distribution alliances with IPS-Sendero ( and Unisys (, making Kamakura products available in almost every major city around the globe.

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