Introducing The Corporate Bond Investor

Apr. 30, 2015 6:10 PM ET


  • Kamakura Corporation has launched a new service on Seeking Alpha that brings traded bond prices and state-of-the-art default probabilities to all investors, large and small.
  • The service ranks all heavily-traded issues weekly by "best value," defined as the ratio of credit spread to matched maturity default probabilities.
  • The default probabilities used are the state-of-the-art KRIS version 6.0 default probabilities built on 2.2 million observations and more than 2,700 defaults from 1990 to 2014.

It's a great pleasure to announce a new premium service from Kamakura Corporation on, The Corporate Bond Investor. This new service is an important step forward in Kamakura's efforts to bring bond market transparency and state-of-the-art financial and risk analysis to all investors, from retail investors to the largest and most sophisticated investors in the world.

Fixed income investors have learned the hard way that reliance on legacy ratings can be a negative alpha investment strategy. In fact, Prof. Jens Hilscher, senior research fellow at Kamakura Corporation and professor at Brandeis, and Prof. Mungo Wilson of Oxford University have shown that modern statistical methods like those used for The Corporate Bond Investor are much more accurate than legacy ratings. Corporate default probabilities, which are at the heart of The Corporate Bond Investor, are very important for another reason. Prof. Hilscher, writing with Prof. John Campbell of Harvard University and Dr. Jan Szilagyi of Fortress Investment Group, showed that high default risk common stocks underperform low default risk common stocks in the Journal of Finance in 2008 and in the Journal of Investment Management in 2011.

Each week, members of The Corporate Bond Investor receive a listing of the most attractive corporate bond investments among heavily-traded, fixed-rate, non-call, senior debt issues for three maturity ranges: 1 year or longer, 10 years or longer and 20 years or longer. The bond rankings are generated by Kamakura Corporation, one of the world's most respected risk management firms with clients in 45 countries. Companies that have been featured in recent rankings by Kamakura Corporation include Bank of America Corporation (BAC), Berkshire Hathaway (BRK.A) (BRK.B), Apple Inc. (AAPL), BP PLC (BP), and Exxon Mobil (XOM). The bond prices and default probabilities are provided by Kamakura Risk Information Services. The Corporate Bond Investor features the newest version of the Kamakura Risk Information Services default probabilities. The new version, version 6.0, will not be released for general use until late-June 2015, but the version 6.0 default probabilities will be available on The Corporate Bond Investor starting on May 1. The bond prices used are for bond issues recorded by FINRA's TRACE system with at least $5 million in daily trading volume.

Here's what subscribers receive:

  1. Weekly updates on credit spreads and default probabilities for heavily-traded U.S. corporate bonds
  2. The ratio of credit spreads to default probabilities is used to rank "best value" bonds
  3. All heavily-traded, senior, non-call, fixed-rate debt, excluding bonds with survivor options, are included
  4. KRIS default probabilities are used world-wide by central banks, banks, investment managers and insurance firms
  5. Bond prices used are traded prices in the U.S. corporate bond market via TRACE
  6. Credit spreads used are carefully interpolated from matched maturity Treasury yields
  7. Methodology is supervised by Prof. Robert A. Jarrow and Dr. Donald R. van Deventer

I'm very grateful that the readers of have ranked me the number 1 fixed income analyst beginning in January 2014. The encouragement and suggestions that we've gotten from the 4 million subscribers on Seeking Alpha are what has made it possible to bring The Corporate Bond Investor to fruition.

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More Background on The Corporate Bond Investor

The criterion used for ranking the "best value" trades is the ratio of matched maturity credit spread to matched maturity default probability. The Kamakura Corporation default probabilities used for The Corporate Bond Investor are also used by a wide array of central banks, commercial banks, insurance firms, and investment management firms around the world. The calculations are supervised by Kamakura's founder, chairman and chief executive officer Dr. Donald R. van Deventer and Kamakura's Managing Director for Research Prof. Robert A. Jarrow.

This article was written by

Donald van Deventer profile picture
A daily ranking of corporate bonds by best risk-adjusted return

Donald R. van Deventer founded the Kamakura Corporation in April, 1990 and is currently Chairman and Chief Executive Officer. Dr. van Deventer's emphasis at Kamakura Corporation is enterprise wide risk management and modern credit risk technology. The third edition of his book, Advanced Financial Risk Management (with Kenji Imai and Mark Mesler) is forthcoming in 2022.  Dr. van Deventer was senior vice president in the investment banking department of Lehman Brothers (then Shearson Lehman Hutton) from 1987 to 1990. During that time, he was responsible for 27 major client relationships including Sony, Canon, Fujitsu, NTT, Tokyo Electric Power Co., and most of Japan's leading banks. From 1982 to 1987, Dr. van Deventer was the treasurer for First Interstate Bancorp in Los Angeles. In this capacity he was responsible for all bond financing requirements, the company’s commercial paper program, and a multi-billion dollar derivatives hedging program for the company. Dr. van Deventer was a Vice President in the risk management department of Security Pacific National Bank from 1977 to 1982. Dr. van Deventer holds a Ph.D. in Business Economics, a joint degree of the Harvard University Department of Economics and the Harvard Graduate School of Business Administration. He was appointed to the Harvard University Graduate School Alumni Association Council in 1999 and served through 2021. Dr. van Deventer was Chairman of the Council for four years from 2012 to 2016. From 2005 through 2009, he served as one of two appointed directors of the Harvard Alumni Association representing the Graduate School of Arts and Sciences. Dr. van Deventer also holds a degree in mathematics and economics from Occidental College, where he graduated second in his class, summa cum laude, and Phi Beta Kappa. Dr. van Deventer speaks Japanese and English.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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