Related papers: Bankruptcy risk model and empirical tests
We report a study of a stylized banking cascade model investigating systemic risk caused by counter party failure using liabilities and assets to define banks' balance sheet. In our stylized system, banks can be in two states: normally…
We study how firm heterogeneity and market power affect macroeconomic fragility, defined as the probability of long slumps. We propose a theory in which the positive interaction between firm entry, competition and factor supply can give…
The major perspective of this paper is to provide more evidence regarding how "quickly", in different macroeconomic states, companies adjust their capital structure to their leverage targets. This study extends the empirical research on the…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…
We introduce a statistical model for operational losses based on heavy-tailed distributions and bipartite graphs, which captures the event type and business line structure of operational risk data. The model explicitly takes into account…
We introduce a simple agent-based model which allows us to analyze three stylized facts: a fat-tailed size distribution of companies, a `tent-shaped' growth rate distribution, the scaling relation of the growth rate variance with firm size,…
Credit estimation and bankruptcy prediction methods have been utilizing Altman's $z$ score method for the last several years. It is reported in many studies that $z$ score is sensitive to changes in accounting figures. Researches have…
Measuring systemic risk or fragility of financial systems is a ubiquitous task of fundamental importance in analyzing market efficiency, portfolio allocation, and containment of financial contagions. Recent attempts have shown that…
Background: Zipf's law and Heaps' law are two representatives of the scaling concepts, which play a significant role in the study of complexity science. The coexistence of the Zipf's law and the Heaps' law motivates different understandings…
We extend the Vasi\v{c}ek loan portfolio model to a setting where liabilities fluctuate randomly and asset values may be subject to systemic jump risk. We derive the probability distribution of the percentage loss of a uniform portfolio and…
Firm foundation theory estimates a security's firm fundamental value based on four determinants: expected growth rate, expected dividend payout, the market interest rate and the degree of risk. In contrast, other views of decision-making in…
A problem of optimal debt management is modeled as a noncooperative game between a borrower and a pool of lenders, in infinite time horizon with exponential discount. The yearly income of the borrower is governed by a stochastic process.…
Zipf's law states that the frequency of an observation with a given value is inversely proportional to the square of that value; Taylor's law, instead, describes the scaling between fluctuations in the size of a population and its mean.…
A methodology is developed to identify, as units of study, each decrease in the value of a stock from a given maximum price level. A critical level in the amount of price declines is found to separate a segment operating under a random walk…
We investigate the problem of wealth distribution from the viewpoint of asset exchange. Robust nature of Pareto's law across economies, ideologies and nations suggests that this could be an outcome of trading strategies. However, the simple…
Public debt is one of the important economic variables that quantitatively describes a nation's economy. Because bankruptcy is a risk faced even by institutions as large as governments (e.g. Iceland), national debt should be strictly…
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
We study the finite-size effects in some scaling systems, and show that the finite number of agents N leads to a cut-off in the upper value of the Pareto law for the relative individual wealth. The exponent $\alpha$ of the Pareto law…