Related papers: Effects of Economic Interactions on Credit Risk

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For more than a half-century, credit risk management has used credit scoring models in each of its well-defined stages to manage credit risk. Application scoring is used to decide whether to grant a credit or not, while behavioral scoring…

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We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…

Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…

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In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…

The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In…

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Do firm dynamics matter for the transmission of monetary policy? Empirically, the startup rate declines following a monetary contraction, while the exit rate increases, both of which reduce aggregate employment. I present a model that…

We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations…

Consider an insurance company exposed to a stochastic economic environment that contains two kinds of risk. The first kind is the insurance risk caused by traditional insurance claims, and the second kind is the financial risk resulting…

With the network methods and random matrix theory, we investigate the interaction structure of communities in financial markets. In particular, based on the random matrix decomposition, we clarify that the local interactions between the…

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