Kamakura Risk Manager: Integrated Solutions in a Single Offer

Kamakura Risk Manager: Integrated Solutions in a Single Offer

05.10.2018 12:45 pm


Kamakura Corporation is known as world’s leading provider of risk management information, risk management software and risk management consulting. Founded in 1990, the company offers wide range of services that have proven its effectiveness and reliability over the past decades. Moreover, Kamakura Corporation’s expertise is portrayed in its constant efforts to provide research-based, transparent, and accurate information and services to its clients worldwide. This time one of the Kamakura’s solutions is presented below. 

What is the solution?  

Kamakura Risk Manager (KRM) is a vast system that fully integrates credit portfolio management, market risk management, asset and liability management, Basel 2 and other capital allocation technologies, transfer pricing and performance measurement. Kamakura Risk Manager (KRM) deploys a solid analytical foundation with six yield curve smoothing methods and five different term structure models for valuation, pricing, and hedging of a wide range of equity securities, fixed income securities, foreign exchange contracts. KRM also provides an unmatched list of derivatives and exotics.

Kamakura's risk management vison 

What does it do?

Kamakura Risk Manager (KRM) calculates operational risk, total risk and accounting, as well as regulatory requirements using the same analytical engine, GUI and reporting. This sophisticated solution rests on Kamakura’s risk management vision. Particularly it represents completely integrated risk solution based on common assumptions and methodologies. 

What are the key features of KRM?          

  • Implements Robert Jarrow’s reduced form model of credit risk with a time dependent default intensity
  • Utilizes observable debt prices to imply both default intensity and market liquidity’s impact on observable credit spreads for sovereigns, corporations, and other issuers of debt. Counterparties who are not themselves issuers of debt are modeled using another credit as a benchmark for their credit risk. Their default may or may not be correlated with the benchmark.
  • Recognizes that the liquidity of the debt markets and the equity markets impact market prices and that this impact should not be mistaken for a change in default probabilities.
  • Introduces a seventh KRM yield curve smoothing method, maximum smoothness credit spread smoothing. Maximum smoothness credit spread smoothing, along with the Jarrow liquidity adjustment, reveals expected losses implied by debt prices with great clarity
  • Models credit-adjusted value at risk with the true “two humped” probability distribution that results when issuers of debt are truly in distress.
  • Shows the impact of default on value at risk, even with diversification, in a way that makes clear why there are fat “tails” in the true loss distribution.
  • Produces default probabilities without reliance on unobservable factors like “the expected return on the market portfolio” or the correlation between two unobservable variables (both of which are necessary in using the Merton model to calculate default probabilities)
  • Provides true credit-adjusted mark to market gains or losses and expected losses, not just replacement cost times the expected loss given default.

Cost and Efficiency

Kamakura delivers integrated solutions in a singular software offering. This integration is lucrative from a cost and efficiency standpoint and crucial for true and effective enterprise wide risk management. Kamakura Corporation is the first software company in the world to provide a single, fully integrated software package that performs critical functions previously requiring multiple vendors. 


All the information and visuals were retrieved from Kamakura Corporation's official website.

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