SOURCE: Kamakura Corporation

Kamakura Corporation

August 03, 2009 10:00 ET

Kamakura Reports Fourth Consecutive Improvement in Global Credit Quality in July

Troubled Company Index Down to 14.7% From 24.3% in March

NEW YORK, NY--(Marketwire - August 3, 2009) - Kamakura Corporation announced Monday that the Kamakura index of troubled public companies made its fourth consecutive dramatic improvement in July after reaching a peak of 24.3% in March. The Kamakura global index of troubled companies dropped 1.7 percentage points to 14.7% of the public company universe in July. Kamakura defines a troubled company as a company whose short term default probability is in excess of 1%. Credit conditions are now better than credit conditions in 38.8% of the months since the index's initiation in January 1990. In March, by contrast, credit conditions were better than only 3.6% of the monthly periods since 1990. The all-time low in the index was 5.4%, recorded in April and May 2006, while the all-time high in the index was 28.0%, recorded in September 2001. The index is based on default probabilities for 26,951 companies in 30 countries. The absolute number of firms in the "over 20%" default probability category declined by 84 firms to 296. To follow the troubled company index and other risk commentary by Kamakura on a daily basis, see

Kamakura's President Warren A. Sherman said Monday, "During the month of July, the rated public companies showing the sharpest rise in short term default risk were CIT Group, Chem Rx Corporation, American Axle, and Sharp Holding Corporation. In July, the percentage of the global corporate universe with default probabilities between 1% and 5% decreased by 0.9 percentage points to 9.8%. The percentage of companies with default probabilities between 5% and 10% was down 0.4 percentage points to 2.3% of the universe in July. The percentage of the universe with default probabilities between 10% and 20% was down 0.1 percentage points to 1.5% of the universe. The percentage of companies with default probabilities over 20% was down sharply by 0.3 percentage points to 1.1% of the total universe in July. In March, by contrast, 3.1% of the total universe had default probabilities over 20%."

The Kamakura index uses the annualized one month default probability produced by the best performing credit model of the Kamakura Risk Information Services default and correlation service. The model used is the fourth generation Jarrow-Chava reduced form default probability, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.

Kamakura CEO Dr. Donald R. van Deventer and other members of Kamakura senior management also maintain an active blog on key risk management issues. Recent blog entries include the following stories:

--  Long Run Risk Management Technology Implications of the Latest Case-
    Shiller Home Price Indices
--  A Pass/Fail Test for Bank CEOs and Directors: An Alphabet of 26 Extra
    Credit Questions
--  Simulating the Term Structure of Interest Rates -- How Many Factors
    are Necessary?
--  Loan Valuation: Comparing Best Practice and Common Practice
--  Out of Sample Performance of Reduced Form and Merton Default Models
--  Implications of DNA for Retail Default Risk and Consumer Credit
--  Lesson 4 from Failures in Silo Risk Management: New Century Financial
--  How Risky Is Your Employer?
--  Yield Curve Smoothing: Nelson-Siegel versus Spline Technologies, Part
--  It's Time for an Independent Audit of Rating Agency Corporate Bond
    Rating Performance
--  AIG plus FNMA plus FHLMC versus Bear plus Lehman plus CIT:
    Implications for Default Modeling
--  The Search for Significance in Default Modeling: The Long and the
    Short of It
--  The Merton Model of Risky Debt: Confessions of a Former True Believer

About Kamakura Corporation

Founded in 1990, Honolulu-based 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 announced the KRIS Sovereign Default Probability Service on May 19, 2008. Kamakura launched its collateralized debt obligation (CDO) pricing service KRIS-CDO in April 2007. Kamakura is also the first company in the world to develop and install a fully integrated enterprise risk management system that analyzes credit risk, market risk, asset and liability management, transfer pricing, and capital allocation. The Kamakura Risk Manager system, now in version 7.0, was first offered commercially in 1993 and has been continually enhanced since then. Kamakura has served more than 200 clients ranging in size from $3 billion in assets to $1.6 trillion in assets. Kamakura's risk management products are currently used in 32 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura has world-wide distribution alliances with Fiserv (, Unisys (, and Zylog Systems ( making Kamakura products available in almost every major city around the globe.

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