Related papers: The economic default time and the Arcsine law

An important question in economics is how people choose between different payments in the future. The classical normative model predicts that a decision maker discounts a later payment relative to an earlier one by an exponential function…

Based on the work of Suzuki (2002), we consider a generalization of Merton's asset valuation approach (Merton, 1974) in which two firms are linked by cross-ownership of equity and liabilities. Suzuki's results then provide no arbitrage…

We introduce the concept of no-arbitrage in a credit risk market under ambiguity considering an intensity-based framework. We assume the default intensity is not exactly known but lies between an upper and lower bound. By means of the…

Many households in developing countries lack formal financial histories, making it difficult for firms to extend credit, and for potential borrowers to receive it. However, many of these households have mobile phones, which generate rich…

Technical debt is a metaphor that describes the long term effects of shortcuts taken in software development activities to achieve near term goals. In this study, we explore a new context of technical debt that relates to database…

Credit assessments activities are essential for financial institutions and allow the global economy to grow. Building robust, solid and accurate models that estimate the probability of a default of a company is mandatory for credit…

In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…

Forecasting the imminent catastrophic failure has a high importance for a large variety of systems from the collapse of engineering constructions, through the emergence of landslides and earthquakes, to volcanic eruptions. Failure forecast…

This paper presents a discrete--time equity derivatives pricing model with default risk in a no--arbitrage framework. Using the equity--credit reduced form approach where default intensity mainly depends on the firm's equity value, we…

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…

The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…

Technical Debt management decisions always imply a trade-off among outcomes at different points in time. In such intertemporal choices, distant outcomes are often valued lower than close ones, a phenomenon known as temporal discounting.…

In this paper, we performs a credit risk analysis, on the data of past loan applicants of a company named Lending Club. The calculation required the use of exploratory data analysis and machine learning classification algorithms, namely,…

This paper introduces a credit risk rating model for credit risk assessment in quantitative finance, aiming to categorize borrowers based on their behavioral data. The model is trained on data from Experian, a widely recognized credit…

We study theoretical and empirical aspects of the mean exit time of financial time series. The theoretical modeling is done within the framework of continuous time random walk. We empirically verify that the mean exit time follows a…

In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to…

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…

This work is attached to the BRICS 2013 competition. We propose a two-stage model for dealing with the temporal degradation of credit scoring models. This methodology produced motivating results in a 1-year horizon. We anticipate that it…

This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…

This article describes and explores taxes and debt in finance. Here a situation is thought about, where tax payments would qualify to be considered as debt. Using this principle we can infer that it is possible to create and price a type of…