SOURCE: Kamakura Corporation

Kamakura Corporation

June 01, 2011 11:00 ET

Measuring Stock Price Bubbles in Real Time: The Case of LinkedIn

Kamakura Releases New Research Paper by Jarrow, Kchia, and Protter

NEW YORK, NY--(Marketwire - Jun 1, 2011) - Honolulu-based Kamakura Corporation announced today the release of a pioneering research paper that uses a new methodology for measuring stock price bubbles in real time. The paper is authored by Kamakura Managing Director Robert A. Jarrow, Professor Younes Kchia of Ecole Polytechnique, and Professor Philip Protter of Columbia University. In the paper, the authors present a precise mathematical definition of a price bubble and use the case of the recent LinkedIn initial public offering to prove that stock price movements in LinkedIn did indeed constitute a stock price bubble. The authors demonstrate how to use this "bubble detection" methodology in real time.

The credit crisis of 2007-2009 has been widely attributed to a bubble in home prices, a period when the price rises to unrealistic levels, only to crash thereafter. The Jarrow-Kchia-Protter ("JKP") paper notes that controlling price bubbles is essential from a regulatory point of view: William Dudley, the President of the New York Federal Reserve, in an April 9, 2010 interview with Planet Money stated, "... what I am proposing is that we try to identify bubbles in real time, try to develop tools to address those bubbles, try to use those tools when appropriate to limit the size of those bubbles and, therefore, try to limit the damage when those bubbles burst."

"The difficulty in controlling price bubbles in the past has been a significant one," said Kamakura founder and Chief Executive Officer Donald R. van Deventer, "One man's bubble is another man's 'can't lose' investment opportunity. The JKP paper is extremely important in providing a firm definition of a bubble which is fully consistent with state of the art mathematical finance and then showing how to apply this bubble detection technology in real time. The authors conclude that stock price movements in LinkedIn following its recent initial public offering could have been detected as a bubble in real time using the JKP approach."

For copies of the JKP paper, please contact
David Boldon, Washington, D.C, 1-201-240-6235, dboldon@kamakuraco.com
Suresh Sankaran, London, 44-07725-544-770, ssankaran@kamakuraco.com
Toshio Murate, Tokyo, 81-090-8033-6755, tmurate@kamakuraco.com
Li Li, Shanghai, 86-21-6103-7052, lli@kamakuraco.com

To request information from other locations, please contact info@kamakuraco.com.

About Kamakura Corporation
Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura has taken Credit Technology Innovation Awards from Credit Magazine each year since 2008. In 2010, Kamakura was the only vendor to win 2 innovation awards, one each with distribution partners Fiserv and Thomson Reuters. Kamakura, along with its distributor Fiserv, was ranked number one in asset and liability management analysis and liquidity risk analysis in the RISK Technology Rankings in 2009. Kamakura Risk Manager, first sold commercially in 1993 and now in version 7.2, was also named in the top five for market risk assessment, Basel II capital calculations, and for "risk dashboard." Kamakura was also ranked in the RISK Technology Rankings 2008 as one of the world's top 3 risk information providers for its KRIS default probability service. The KRIS public firm default service was launched in 2002, and the KRIS sovereign default service, the world's first, was launched in 2008. KRIS default probabilities are displayed for 4000 corporates and sovereigns via the Reuters 3000 Xtra service and the Thomson Reuters Eikon service. Kamakura has served more than 200 clients ranging in size from $1.5 billion in assets to $1.6 trillion in assets. Kamakura's risk management products are currently used in 34 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, South America, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura has world-wide distribution alliances with Fiserv (www.fiserv.com), Sumisho Computer Systems (http://www.scs.co.jp/english/), Unisys (www.unisys.com), and Zylog Systems (www.zsl.com) making Kamakura products available in almost every major city around the globe.

Contact Information