Related papers: Bankruptcy risk model and empirical tests
Is the large influence that mutual funds assert on the U.S. financial system spread across many funds, or is it is concentrated in only a few? We argue that the dominant economic factor that determines this is market efficiency, which…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
This article contains new tools for studying the shape of the stationary distribution of sizes in a dynamic economic system in which units experience random multiplicative shocks and are occasionally reset. Each unit has a Markov-switching…
History-dependent processes are ubiquitous in natural and social systems. Many such stochastic processes, especially those that are associated with complex systems, become more constrained as they unfold, meaning that their sample-space, or…
This paper proposes a new measure of tail risk spillover. The empirical application provides evidence of significant volatility and tail risk spillovers from the financial sector to many real economy sectors in the U.S. economy in the…
Bankruptcy prediction is very important for all the organization since it affects the economy and rise many social problems with high costs. There are large number of techniques have been developed to predict the bankruptcy, which helps the…
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…
The aim of this article is to analyze data from multiple repairable systems under the presence of dependent competing risks. In order to model this dependence structure, we adopted the well-known shared frailty model. This model provides a…
In complex systems like financial market, risk tolerance of individuals is crucial for system resilience.The single-security price limit, designed as risk tolerance to protect investors by avoiding sharp price fluctuation, is blamed for…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
We study efficient risk sharing among risk-averse agents in an economy with a large, finite number of states. Following a random shock to an initial agreement, agents may renegotiate. If they require a minimal utility improvement to accept…
We investigate the accumulated wealth distribution by adopting evolutionary games taking place on scale-free networks. The system self-organizes to a critical Pareto distribution (1897) of wealth $P(m)\sim m^{-(v+1)}$ with $1.6 < v <2.0$…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…
In recent years, multi-factor strategies have gained increasing popularity in the financial industry, as they allow investors to have a better understanding of the risk drivers underlying their portfolios. Moreover, such strategies promise…
We analyze the household savings problem in a general setting where returns on assets, non-financial income and impatience are all state dependent and fluctuate over time. All three processes can be serially correlated and mutually…
For centuries, national economies created wealth by engaging in international trade and production. The resulting international supply networks not only increase wealth for countries, but also create systemic risk: economic shocks,…
All economies require physical resource consumption to grow and maintain their structure. The modern economy is additionally characterized by private debt. The Human and Resources with MONEY (HARMONEY) economic growth model links these…
Predicting corporate default risk has long been a crucial topic in the finance field, as bankruptcies impose enormous costs on market participants as well as the economy as a whole. This paper aims to forecast frailty correlated default…
We present a simple model of firm rating evolution. We consider two sources of defaults: individual dynamics of economic development and Potts-like interactions between firms. We show that such a defined model leads to phase transition,…