Related papers: Bankruptcy risk model and empirical tests
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…
Zipf's law states that the number of firms with size greater than S is inversely proportional to S. Most explanations start with Gibrat's rule of proportional growth but require additional constraints. We show that Gibrat's rule, at all…
Zipf's law states that the probability of a variable being larger than $s$ is roughly inversely proportional to $s$. In this paper, we evaluate Zipf's law for the distribution of firm size by the number of employees in Brazil. We use…
We study a resource utilization scenario characterized by intrinsic fitness. To describe the growth and organization of different cities, we consider a model for resource utilization where many restaurants compete, as in a game, to attract…
Building on similarities between earthquakes and extreme financial events, we use a self-organized criticality-generating model to study herding and avalanche dynamics in financial markets. We consider a community of interacting investors,…
We study size and growth distributions of products and business firms in the context of a given industry. Firm size growth is analyzed in terms of two basic mechanisms, i.e. the increase of the number of new elementary business units and…
The major perspective of this paper is to provide more evidence into the empirical determinants of capital structure adjustment in different macroeconomics states by focusing and discussing the relative importance of firm-specific and…
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…
We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…
Drawing on recent contributions inferring financial interconnectedness from market data, our paper provides new insights on the evolution of the US financial industry over a long period of time by using several tools coming from network…
Solomon and Golo [1] have recently proposed an autocatalytic (self-reinforcing) feedback model which couples a macroscopic system parameter (the interest rate), a microscopic parameter that measures the distribution of the states of the…
We analyze the distribution of income and income tax of individuals in Japan for the fiscal year 1998. From the rank-size plots we find that the accumulated probability distribution of both data obey a power law with a Pareto exponent very…
There is empirical evidence that recovery rates tend to go down just when the number of defaults goes up in economic downturns. This has to be taken into account in estimation of the capital against credit risk required by Basel II to cover…
Many complex systems are composed of disparate, interacting types of varying sizes: Species abundances in ecosystems, firm sizes in markets, city populations in countries, word counts in language, etc. A longstanding mystery of complex…
The 2023 U.S. banking crisis propagated not through direct financial linkages but through a high-frequency, information-based contagion channel. This paper moves beyond exploration analysis to test the "too-similar-to-fail" hypothesis,…
We develop a model for the evolution of economic entities within a geographical type of framework. On a square symmetry lattice made of three (economic) regions, firms, described by a scalar fitness, are allowed to move, adapt, merge or…
As economic entities become increasingly interconnected, a shock in a financial network can provoke significant cascading failures throughout the system. To study the systemic risk of financial systems, we create a bi-partite banking…
Consider an insurance company exposed to a stochastic economic environment that contains two kinds of risk. The first kind is the insurance risk caused by traditional insurance claims, and the second kind is the financial risk resulting…
We investigate spatial dependence in Zipf's law for cities among the OECD countries. The aim is to identify an upper tail of the distribution that follows a power law (Pareto) but is perturbed by spatial autocorrelation, as indicated by a…
We statistically investigate the distribution of share price and the distributions of three common financial indicators using data from approximately 8,000 companies publicly listed worldwide for the period 2004-2013. We find that the…