Is the Hawkes graph approach applicable for examining the bankruptcy risk dependence structure? An empirical analysis of firms' bankruptcies in Japan

We examine the types of bankruptcy risk dependence structures of Japanese firms by using a multidimensional Hawkes process. For this purpose, we concentrate on a new approach called the Hawkes graph introduced by Embrechts and... [ view full abstract ]

We examine the types of bankruptcy risk dependence structures of Japanese firms by using a multidimensional Hawkes process. For this purpose, we concentrate on a new approach called the Hawkes graph introduced by Embrechts and Kirchner (2018) to estimate the intensity of the multidimensional Hawkes process and assess whether the Hawkes graph approach is applicable for examining bankruptcy risk dependence structures, using historical data on firms' bankruptcies in Japan.We find that the approach can be used to analyze such credit risk dependence compared with the maximum likelihood method for the conventional Hawkes intensity specified by an exponentially decaying function.