Related papers: Bankruptcy risk model and empirical tests
We address challenges in variable selection with highly correlated data that are frequently present in finance, economics, but also in complex natural systems as e.g. weather. We develop a robustified version of the knockoff framework,…
Fractals, 1/f noise, Zipf's law, and the occurrence of large catastrophic events are typical ubiquitous general empirical observations across the individual sciences which cannot be understood within the set of references developed within…
We revisit granular models that represent the size of a firm as the sum of the sizes of multiple constituents or sub-units. Originally developed to address the unexpectedly slow reduction in volatility as firm size increases, these models…
Urban scaling and Zipf's law are two fundamental paradigms for the science of cities. These laws have mostly been investigated independently and are often perceived as disassociated matters. Here we present a large scale investigation about…
The Pareto model is very popular in risk management, since simple analytical formulas can be derived for financial downside risk measures (Value-at-Risk, Expected Shortfall) or reinsurance premiums and related quantities (Large Claim Index,…
We study the dependence structure of market states by estimating empirical pairwise copulas of daily stock returns. We consider both original returns, which exhibit time-varying trends and volatilities, as well as locally normalized ones,…
An Atlas model is a rank-based system of continuous semimartingales for which the steady-state values of the processes follow a power law, or Pareto distribution. For a power law, the log-log plot of these steady-state values versus rank is…
This study explores the relationship between R&D intensity, as a measure of innovation, and financial performance among S&P 500 companies over 100 quarters from 1998 to 2023, including multiple crisis periods. It challenges the conventional…
Random shifting typically appears in credibility models whereas random scaling is often encountered in stochastic models for claim sizes reflecting the time-value property of money. In this article we discuss some aspects of random shifting…
Will a large economy be stable? Building on Robert May's original argument for large ecosystems, we conjecture that evolutionary and behavioural forces conspire to drive the economy towards marginal stability. We study networks of firms in…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
We consider continuous time risk processes in which the claim sizes are dependent and non-identically distributed phase-type distributions. The class of distributions we propose is easy to characterize and allows to incorporate the…
The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…
Pareto law, which states that wealth distribution in societies have a power-law tail, has been a subject of intensive investigations in statistical physics community. Several models have been employed to explain this behavior. However, most…
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
A public firm's bankruptcy prediction is an important financial research problem because of the security price downside risks. Traditional methods rely on accounting metrics that suffer from shortcomings like window dressing and…
We present empirical data on frequency and pattern of misprints in citations to twelve high-profile papers. We find that the distribution of misprints, ranked by frequency of their repetition, follows Zipf's law. We propose a stochastic…
First passage models, where corporate assets undergo a random walk and default occurs if the assets fall below a threshold, provide an attractive framework for modeling the default process. Recently such models have been generalized to…
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted…