Estimation of chain reaction bankruptcy structure by chance discovery method — With time order method and directed KeyGraph

Chain reaction bankruptcy is regarded as common phenomenon and its effect is to be taken into account when credit risk portfolio is analyzed. But consideration and modeling of its effect leave much room for improvement. That is mainly because method for grasping relations among companies with limited data is underdeveloped. In this article, chance discovery method is applied to estimate industrial relations that are to include companies’ relations that transmit chain reaction of bankruptcy. Time order method and directed KeyGraph are newly introduced to distinguish and express the time order among defaults that is essential information for the analysis of chain reaction bankruptcy. The steps for the data analysis are introduced and result of example analysis with default data in Kyushu, Japan, 2005 is presented. The structure estimated by the new method is compared with the structure of actual account receivable holders of bankrupted companies for evaluation. The original version was presented on the International Conference on Computational Science (ICCS 2007) Shinichi Goda received the B.S. degree in economics from The University of Tokyo, Tokyo, Japan, and M.S. degrees in management from Massachusetts Institute of Technology, Boston, Massachusetts, U.S. His research interests lie in chance discovery, risk management and finance. He is a member of JAFEE. Yukio Ohsawa is an Associate Professor in the School of Engineering, The University of Tokyo. He received Ph.D. in Engineering from The University of Tokyo. He initiated the research area of Chance Discovery. On Chance Discovery, he co-edited/wrote six books and five special issues for journals. Since 2003, his activity as the general chair of the Chance Discovery Consortium Japan has been to link researchers in cognitive science, information sciences, and business sciences, and business people, in order to realize a global team to invent and circulate new methods for Chance Discovery. It also let to the introduction of these techniques to universities in China, US,UK, etc.