Agent Simulation of Chain Bankruptcy

Details Agent Simulation of Chain Bankruptcy Agent Simulation of Chain Bankruptcy

2007-09-27

arxiv.org/abs/0709.4355v1

Economy

Quantitative Finance

General Finance

Proceeding of APFA6

Scientific paper

We have conducted an agent-based simulation of chain bankruptcy. The propagation of credit risk on a network, i.e., chain bankruptcy, is the key to nderstanding largesized bankruptcies. In our model, decrease of revenue by the loss of accounts payable is modeled by an interaction term, and bankruptcy is defined as a capital deficit. Model parameters were estimated using financial data for 1,077 listed Japanese firms. Simulations of chain bankruptcy on the real transaction network consisting of those 1,077 firms were made with the estimated model parameters. Given an initial bankrupt firm, a list of chain bankrupt firms was obtained. This model can be used to detect high-risk links in a transaction network, for the management of chain bankruptcy.

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