Related papers: Bankruptcy risk model and empirical tests

We study productivity dispersions across workers, firms and industrial sectors. Empirical study of the Japanese data shows that they all obey the Pareto law, and also that the Pareto index decreases with the level of aggregation. In order…

We present a novel methodology to quantify the "impact" of and "response" to market shocks. We apply shocks to a group of stocks in a part of the market, and we quantify the effects in terms of average losses on another part of the market…

The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…

The credit crisis roiling the world's financial markets will likely take years and entire careers to fully understand and analyze. A short empirical investigation of the current trends, however, demonstrates that the losses in certain…

We analyze the statistical dependency structure of the S&P 500 constituents in the 4-year period from 2007 to 2010 using intraday data from the New York Stock Exchange's TAQ database. With a copula-based approach, we find that the…

We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…

The existence of large and extreme claims of a non-life insurance portfolio influences the ability of (re)insurers to estimate the reserve. The excess over-threshold method provides a way to capture and model the typical behaviour of…

Margin trading in which investors purchase shares with money borrowed from brokers is blamed to be a major cause of the 2015 Chinese stock market crash. We propose a cascading failure model and examine how an increase in margin trading…

We introduce a model of proportional growth to explain the distribution of business firm growth rates. The model predicts that the distribution is exponential in the central part and depicts an asymptotic power-law behavior in the tails…

It has been shown recently that a specific class of path-dependent stochastic processes, which reduce their sample space as they unfold, lead to exact scaling laws in frequency and rank distributions. Such Sample Space Reducing processes…

In order to study the phenomenon in detail that income distribution follows Pareto law, we analyze the database of high income companies in Japan. We find a quantitative relation between the average capital of the companies and the Pareto…

We address the role of multiplicative stochastic processes in modeling the occurrence of power-law city size distributions. As an explanation of the result of Zipf's rank analysis, Simon's model is presented in a mathematically elementary…

This article extends the autoregressive count time series model class by allowing for a model with regimes, that is, some of the parameters in the model depend on the state of an unobserved Markov chain. We develop a quasi-maximum…

How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…

The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…

Foundation models have shown promise across various financial applications, yet their effectiveness for corporate bankruptcy prediction remains systematically unevaluated against established methods. We study bankruptcy forecasting using…

We performed extensive simulations accompanied by a detailed study of a two-segment size random sequential model on the line. We followed the kinetics towards the jamming state, but we paid particular attention to the characterization of…

Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…

While defaults are rare events, losses can be substantial even for credit portfolios with a large number of contracts. Therefore, not only a good evaluation of the probability of default is crucial, but also the severity of losses needs to…

In this paper, we model dependence between operational risks by allowing risk profiles to evolve stochastically in time and to be dependent. This allows for a flexible correlation structure where the dependence between frequencies of…