Head office: 2222 Kalakaura Avenue, Suite 1400, Honolulu, Hawaii 96815, US Tel: +1 808 791 9888 Email:
info@kamakuraco.com Other offices: Amsterdam, Beijing, Chicago, Frankfurt, Hong Kong, Limassol, London, Los Angeles, Malaga, Melbourne, Moscow, Munich, New York, Seoul, Shanghai, Singapore, Sydney, Tokyo, Toronto, Warsaw, Washington Website:
www.kamakuraco.com Twitter: @KamakuraCo Contact: Dr Donald van Deventer, CEO, Mr Warren Sherman, President & COO, Mr Martin Zorn, CFO and CAO Founded: 1990 Ownership: Privately owned Number of staff: Around 150
KRM
KRM is now intended to provide a fully integrated solution across credit risk, market risk, liquidity risk, foreign exchange risk, asset/liability management, funds transfer pricing, and operational risk analytics (compliant with Basel II, Basel III and Sarbanes-Oxley). The supplier claims there is the flexibility to add functionality on an ongoing basis and transaction by transaction processing of complex securities. For credit risk, KRM offers reduced form and structural models; implied PD models (risky bonds and credit default swaps); logistic regression PD models with user-defined variables; collateral and hedge relationships; credit VaR; credit-adjusted income simulation; expected loss distributions and analysis; macro risk factor analysis; and economic capital modelling. Key features of KRM for Basel II include: three standard VaR methodologies (matrix, historical, Monte Carlo) to support an internal models approach to market risk; Pillar 1 compliance with all three credit risk approaches (standardised, foundation IRB, advanced IRB); simple or comprehensive approach to collateral; integrated Pillar 2 stress and scenario testing; Pillar 2 banking book IRR; determination of risk-weighted regulatory capital requirements and surplus; and multiple methodologies, including structural and reduced form models for default probabilities and other valuation models. In terms of IAS 39, the system generates cash flows and fair values for all asset classes; amortises fees and commissions over the life of underlying loans; determines effective interest rates; supports the definition of hedge relationships; tracks
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retrospective hedge effectiveness; tests prospective hedge effectiveness through forward-looking simulation of cash flows and fair values; tests hedge effectiveness of options against components of value, for example intrinsic value; and leverages the integrated default intensity framework to support the determination of individual and collective impairment. For interest rate risk, KRM is intended to contain the basic building blocks of rate analysis, including: market standard and proprietary yield curve smoothing techniques; multiple term structure models to forecast the evolution of interest rates and yield curves; unlimited formula-driven rate indices to support the modelling of discrete rates such as base/prime or internally administered rates such as savings rates; and deterministic or stochastic (Monte Carlo) generated scenarios. For liquidity risk, Kamakura claims cash flow modelling
incorporating up to 999 future periods in any user-defined buckets. It also includes: all contractual cash flows including structures and amortisations; cash flows from embedded options that change with prevailing rates; roll-over and re- investment strategies; new business origination through time; cash flows from off-balance sheet commitments; and multi- factor prepayment and early withdrawal models. In terms of market risk, as mentioned, KRM enables the comparison of results from historical VaR, variance/co- variance (matrix) VaR, and Monte Carlo VaR. KRM also enables the user to determine the incremental VaR and VaR sensitivity for any level of data granularity (individual transactions through to the entire balance sheet) and for any risk factor. Risk factor volatilities and correlations can be calculated within KRM or can be user-supplied. There was work being
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