SOURCE: Kamakura Corporation; Thomson Reuters

Kamakura Corporation; Thomson Reuters

Kamakura Corporation; Thomson Reuters

September 28, 2009 15:06 ET

Thomson Reuters Integrates Kamakura's Default Probabilities Into CDS Pricing and Analytics Suite: First to Market Relative Analysis Tool Using Reduced-Form Default Probabilities

LONDON--(Marketwire - September 28, 2009) - Thomson Reuters today announced that it has integrated Kamakura's default probability service into its flagship financial desktop, Reuters 3000Xtra.

Kamakura's default probabilities are now available via Reuters 3000 Xtra covering a universe of more than 1,500 public firms and close to 100 sovereign entities. Along with Thomson Reuters CDS spread data, the two firms have created a Market Premium Ratio, which helps identify the portion of a traded CDS spread that indicates actual default risk and the portion of the spread that reflects other factors, such as liquidity. Thomson Reuters has also built related tools to facilitate relative value analysis on CDS spreads for purposes of arbitrage, hedging and risk valuation.

Kamakura, a leading provider of risk management information, processing and software, led the way in developing the world's first fully integrated enterprise risk management system that analyzes credit risk, market risk, asset and liability management, transfer pricing, and capital allocation. The company estimates default probabilities using what is termed as a 'reduced-form' approach. This varies from the commonly used 'structural' methodology in that a much broader array of explanatory variables are used as inputs to forecast the probability of default, thus reducing dependence on the more volatile equity markets.

Andrew Hausman, Global Head of Fixed Income at Thomson Reuters, said, "The recent market turmoil clearly demonstrated limitations with some widely-used approaches to firm valuation. Integrating Kamakura's default probabilities into Reuters 3000Xtra means users can now base their decisions on powerful new intelligent information that will give them a real edge."

Kamakura president and chief operating officer Warren Sherman added, "The current credit crisis has shown very clearly that equity holders and debt holders can have different risk profiles as credit risk increases. A firm where the senior debt holders are rescued in a bailout can still leave subordinated debt holders, preferred stock holders and common stock holders with very large losses. Adding Kamakura default probabilities to Reuters 3000Xtra helps the full spectrum of liability holders distinguish between the risk of failure of a firm and the risk of loss for a given class of liabilities. This is critical to all investors in corporate common stock, preferred stock and traditional fixed income liabilities."

This new joint Thomson Reuters-Kamakura tool offers the following features:

--  The CDS spreads, default probabilities and Market Premium Ratios for
    public and sovereign entities with a default probability equal to or
    greater than 1%.
--  The mean and median of Market Premium Ratios by sector and rating.
--  The ability to chart historical default probabilities, Market Premium
    Ratios and CDS spreads.
    

Reuters 3000 Xtra provides accurate intraday and end-of-day pricing on cash and synthetic credit instruments like loans, bonds and CDS, plus weekly traded volumes, timely news on companies and economies, and exclusive expert data and analysis from Thomson Reuters LPC, IFR Markets and Markit all in one place.

About Thomson Reuters

Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, scientific, healthcare and media markets, powered by the world's most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs more than 50,000 people operating in over 100 countries. Thomson Reuters shares are listed on the New York Stock Exchange (NYSE: TRI); Toronto Stock Exchange (TSX: TRI); London Stock Exchange (LSE: TRIL); and Nasdaq (NASDAQ: TRIN).

For more information, go to www.thomsonreuters.com.

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 (www.fiserv.com), Unisys (www.unisys.com), and Zylog Systems (www.zylog.co.in) making Kamakura products available in almost every major city around the globe.

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