Credit risk, also known as default risk, is the likelihood of a corporation losing money if a business partner defaults. If the liabilities are not met under the terms of the contract, the firm may default, resulting in the loss of the company. There is no clear way to distinguish between organizations that will default and those that will not prior to default. We can only make probabilistic estimations of the risk of default at best. There (...) are two types of credit risk default models in this regard: structural and reduced-form models. Structural models are used to calculate the likelihood of a company defaulting based on its assets and liabilities. If the market worth of a company's assets is less than the debt it owes, it will default. Reduced form models often assume an external cause of default, such as a Poisson jump process, which is driven by a stochastic process. They model default as a random event with no regard for the balance sheet of the company. This paper provides a Review of credit risk default models. (shrink)

Credit risk, also known as default risk, is the likelihood of a corporation losing money if a business partner defaults. If the liabilities are not met under the terms of the contract, the firm may default, resulting in the loss of the company. There is no clear way to distinguish between organizations that will default and those that will not prior to default. We can only make probabilistic estimations of the risk of default at best. There (...) are two types of credit risk default models in this regard: structural and reduced form models. Structural models are used to calculate the likelihood of a company defaulting based on its assets and liabilities. If the market worth of a company's assets is less than the debt it owes, it will default. Reduced form models often assume an external cause of default, such as a Poisson jump process, which is driven by a stochastic process. They model default as a random event with no regard for the balance sheet of the company. This paper provides a Review of credit risk default models. (shrink)

In this note, we consider a Merton model for default risk, where the firm’s value is driven by a Brownian motion and a compound Poisson process.

This article presents a comprehensive framework for valuing financial instruments subject to credit risk. In particular, we focus on the impact of default dependence on asset pricing, as correlated default risk is one of the most pervasive threats in financial markets. We analyze how swap rates are affected by bilateral counterparty credit risk, and how CDS spreads depend on the trilateral credit risk of the buyer, seller, and reference entity in a contract. Moreover, (...) we study the effect of collateralization on valuation, since the majority of OTC derivatives are collateralized. The model shows that a fully collateralized swap is risk-free, whereas a fully collateralized CDS is not equivalent to a risk-free one. (shrink)

This paper argues that the reduced-form jump diffusion model may not be appropriate for credit risk modeling. To correctly value hybrid defaultable financial instruments, e.g., convertible bonds, we present a new framework that relies on the probability distribution of a default jump rather than the default jump itself, as the default jump is usually inaccessible. As such, the model can back out the market prices of convertible bonds. A prevailing belief in the market is that convertible arbitrage is (...) mainly due to convertible underpricing. Empirically, however, we do not find evidence supporting the underpricing hypothesis. Instead, we find that convertibles have relatively large positive gammas. As a typical convertible arbitrage strategy employs delta-neutral hedging, a large positive gamma can make the portfolio highly profitable, especially for a large movement in the underlying stock price. (shrink)

This article presents a new model for valuing financial contracts subject to credit risk and collateralization. Examples include the valuation of a credit default swap (CDS) contract that is affected by the trilateral credit risk of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most pervasive threats in financial markets. We also show that a fully (...) collateralized CDS is not equivalent to a risk-free one. In other words, full collateralization cannot eliminate counterparty risk completely in the CDS market. (shrink)

This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most pervasive threats in financial markets. We also show that a fully collateralized CDS is not equivalent to a risk-free one. In other words, full collateralization cannot eliminate (...) counterparty risk completely in the CDS market. (shrink)

This paper presents a new model for valuing hybrid defaultable financial instruments, such as, convertible bonds. In contrast to previous studies, the model relies on the probability distribution of a default jump rather than the default jump itself, as the default jump is usually inaccessible. As such, the model can back out the market prices of convertible bonds. A prevailing belief in the market is that convertible arbitrage is mainly due to convertible underpricing. Empirically, however, we do not find evidence (...) supporting the underpricing hypothesis. Instead, we find that convertibles have relatively large positive gammas. As a typical convertible arbitrage strategy employs delta-neutral hedging, a large positive gamma can make the portfolio highly profitable, especially for a large movement in the underlying stock price. (shrink)

This paper presents a Least Square Monte Carlo approach for accurately calculating credit value adjustment (CVA). In contrast to previous studies, the model relies on the probability distribution of a default time/jump rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy with a relatively easy implementation. We find that the valuation of a defaultable derivative is normally determined via backward induction when their payoffs could (...) be positive or negative. Moreover, the model can naturally capture wrong or right way risk. (shrink)

This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American style options in most cases, which require a backward induction valuation. To correct a common mistake in the literature, we emphasize that the market value of a defaultable derivative is actually a risky value rather than a risk-free value. (...) Credit value adjustment (CVA) is also elaborated. A practical framework is developed for pricing defaultable derivatives and calculating their CVAs at a portfolio level. (shrink)

There is a commonly made distinction between two types of scientists: risk-taking, trailblazing mavericks and detail-oriented followers. A number of recent papers have discussed the question what a desirable mixture of mavericks and followers looks like. Answering this question is most useful if a scientific community can be steered toward such a desirable mixture. One attractive route is through credit incentives: manipulating rewards so that reward-seeking scientists are likely to form the desired mixture of their own accord. Here (...) I argue that this idea is less straightforward than it may seem. Interpreting mavericks as scientists who prioritize rewards over speed and risk, I show in a deliberatively simple model that there is a fixed mixture which is not particularly likely to be desirable and which credit incentives cannot alter. I consider a way around this result, but this has some major drawbacks. I conclude that credit incentives are not as promising a way to create a desirable mixture of mavericks and followers as one might have thought. (shrink)

Abstract: Ensuring the proactive detection of transaction risks is paramount for financial institutions, particularly in the context of managing credit scores. In this study, we compare different machine learning algorithms to effectively and efficiently. The algorithms used in this study were: MLogisticRegressionCV, ExtraTreeClassifier,LGBMClassifier,AdaBoostClassifier, GradientBoostingClassifier,Perceptron,RandomForestClassifier,KNeighborsClassifier,BaggingClassifier, DecisionTreeClassifier, CalibratedClassifierCV, LabelPropagation, Deep Learning. The dataset was collected from Kaggle depository. It consists of 164 rows and 8 columns. The best classifier with unbalanced dataset was the LogisticRegressionCV. The Accuracy 100.0%, precession 100.0%,Recall100.0% and the (...) F1-score 100.0%. However, the best classifier with balanced dataset was the LogisticRegressionCV. The Accuracy 100.0%, precession 100.0%, Recall 100.0% and the F1-score 100.0%. (shrink)

This chapter argues for deregulation of the credit-rating market. Credit-rating agencies are supposed to contribute to the informational needs of investors trading bonds. They provide ratings of debt issued by corporations and governments, as well as of structured debt instruments (e.g. mortgage-backed securities). As many academics, regulators, and commentators have pointed out, the ratings of structured instruments turned out to be highly inaccurate, and, as a result, they have argued for tighter regulation of the industry. This chapter shows, (...) however, that the role of credit-rating agencies in achieving justice in finance is not as great as these commentators believe. It therefore argues instead for deregulation. Since the 1930s, lawgivers have unjustifiably elevated the rating agencies into official, legally binding sources of information concerning credit risk, thereby unjustifiably causing many institutional investors to outsource their epistemic responsibilities, that is, their responsibility to investigate credit risk themselves. (shrink)

Vietnam’s forests are at risk - carbon offset schemes could be the best chance of saving them, say Dr. Quan-Hoang Vuong and Minh-Hoang Nguyen. The value of forests is deeply ingrained in Vietnamese culture. Rừng vàng, biển bạc” [“forests of gold and seas of silver”] is both a metaphor for Vietnam, and a description of its natural wealth. The phrase is everywhere, from political speeches to daily conversation, as is Nhất phá sơn lâm, nhì đâm hà bá [“the worst (...) crime is to destroy the mountains and forests, the second worst is to kill the river”]. Deforestation is a Vietnamese taboo. (shrink)

Currently, under the conditions of permanent financial risks that hamper the sustainable economic growth in the financial sector, the development of evaluation and risk management methods both regulated by Basel II and III and others seem to be of special importance. The reputation risk is one of significant risks affecting reliability and credibility of commercial banks. The importance of reputation risk management and the quality of their assessment remain relevant as the probability of decrease in or loss (...) of business reputation influences the financial results and the degree of customers’, partners’ and stakeholders’ confidence. By means of imitating modeling based on Bayesian Networks and the fuzzy data analysis, the article characterizes the mechanism of reputation risk assessment and possible losses evaluation in banks by plotting normal and lognormal distribution functions. Monte-Carlo simulation is used to calculate the probability of losses caused by reputation risks. The degree of standardized histogram similarity is determined on the basis of the fuzzy data analysis applying Hamming distance method. The tree-like hierarchy based on the OWA-operator is used to aggregate the data with Fishburne's coefficients as the convolution scales. The mechanism takes into account the impact of criteria, such as return on equity, goodwill value, the risk assets ratio, the share of the productive assets in net assets, the efficiency ratio of interest bearing liabilities, the risk ratio of credit operations, the funding ratio and reliability index on the business reputation of the bank. The suggested methods and recommendations might be applied to develop the decision-making mechanism targeted at the implementation of reputation risk management system in commercial banks as well as to optimize risk management technologies. (shrink)

This paper presents an analytical model for valuing interest rate swaps, subject to bilateral counterparty credit risk. The counterparty defaults are modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently (...) explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. (shrink)

This article discusses the management of cycli- cal dynamics of the credit sphere. Considering the fact that conventional methods of monetary policy proved to be vulnerable to the process of accumula- tion and realization of risk in the credit sector, we aim to study heterodox methods of credit market regula- tion – administrative (direct) methods of control over fluctuations on the credit market. In particular, based on the analysis of credit limits used in the (...) Socialist Republic of Vietnam, we come to conclusion about comparative effectiveness of this method in curbing excessive amplitude of the credit cycle. However, the price of using this method may be connected with re- duction in the rate of economic growth and a shift in the accumulation of risk to other areas of the credit market. (shrink)

The article investigates the main characteristics of the financial stability of Ukrainian banks, their risk profile, structure of assets, liabilities, income, expenses based on the monthly reporting data for 2004-2020 (number of observations – 3 813). The Kohonen self-organizing map (SOM) toolkit is used to form homogeneous groups of banks based on a large number of financial indicators. The selected toolkit provides a convenient visualization of the results. Each bank occupies a specific place on the SOM. The close location (...) of banks on the map indicates that these banks have many common characteristics. This study is called the method of structural and functional groups of banks. The study formed stable groups of banks with the same characteristics of business models and risk profile. The formation of consecutive maps for each reporting period allows to obtain the characteristics of each bank separately and the banking system as a whole. The trajectory of an individual bank’s activity during the observation period characterizes the development of its business strategy. The migration of a large number of banks between groups reflects the objective changes in the conditions of banking. Increasing groups of high-risk banks indicate systemic problems. The results show that after a significant reduction in the banking system of Ukraine in 2014-2016, the business models of banks have changed significantly. The resource base relies on unstable sources of current funds with no set term of use. In the assets of banks, a significant portion is invested in government securities – government bonds. Bank loan portfolios have declined and have a higher proportion of non-performing assets (NPL). Many banks have increased currency risk. Concerns are raised about the state of large state-owned banks that hold a separate high-risk group. Thus, the conducted research allows to distinguish groups of banks with specific characteristics of business models and to observe changes of risk profile inherent to these groups. For each structural-functional group, changes in the values of financial indicators are investigated and migration between groups is studied. The proposed methodology is useful for studying both macro and macro levels. (shrink)

The research evaluates generative AI’s capabilities through a multi-phase framework, addressing how data synthesis, language models, and predictive algorithms contribute to sector-specific applications. In banking, the model assesses the impact of AI-driven chatbot interactions, credit risk assessment, and personalized financial services on customer experience and bank performance. Healthcare applications are explored through image synthesis for diagnostics, predictive modeling in patient care, and drug discovery simulations. The experimental setup is rigorously tested across metrics such as response accuracy, cost-effectiveness, and (...) data privacy to determine the benefits and potential risks associated with generative AI in these fields. (shrink)

The authors of the book have come to the conclusion that it is necessary to effectively use modern approaches the management of innovative development the economic entities in order to increase the efficiency of activity, to ensure competitiveness, to intensify innovation activity. Basic research focuses on assessing the competition of economic entities, internal control in organizations, analysis of credit risk, diagnostics of sources of funding for innovation, assessment of social innovation and human development factors. The research results have (...) been implemented in the different models of reengineering business process, development of alternative agriculture, the digital economy, knowledge management. The results of the study can be used in decision-making at the level the economic entities in different areas of activity and organizational-legal forms of ownership, ministries and departments that promote of development the economic entities on an innovative basis. The results can also be used by students and young scientists in modern concepts and mechanisms for management of innovative development the economic entities in the context of efficient use the resource potential and improvement of innovation policy. (shrink)

This paper attempts to assess the economic significance and implications of collateralization in different financial markets, which is essentially a matter of theoretical justification and empirical verification. We present a comprehensive theoretical framework that allows for collateralization adhering to bankruptcy laws. As such, the model can back out differences in asset prices due to collateralized counterparty risk. This framework is very useful for pricing outstanding defaultable financial contracts. By using a unique data set, we are able to achieve a (...) clean decomposition of prices into their credit risk factors. We find empirical evidence that counterparty risk is not overly important in credit-related spreads. Only the joint effects of collateralization and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of financial contracts. We also analyze the difference between cleared and OTC markets. (shrink)

The authors of the scientific monograph have come to the conclusion that мanagement of socio-economic transformations of business processes requires the use of mechanisms to support of entrepreneurship, sectors of the national economy, the financial system, and critical infrastructure. Basic research focuses on assessment the state of social service provision, analysing economic security, implementing innovation and introducing digital technologies. The research results have been implemented in the different models of costing, credit risk and capital management, tax control, use (...) of artificial intelligence and blockchain. The results of the study can be used in the developing of policies, programmes and strategies for economic security, development of the agricultural sector, transformation of industrial policy, implementation of employment policy in decision-making at the level of ministries and agencies that regulate the management of socio-economic and European integration processes. The results can also be used by students and young scientists in the educational process and conducting scientific research on global challenges and creation scenarios for the development of socio-economic processes. (shrink)

The article provides a critical assessment of The Central Bank of the Russian Federation policy in response to the sanctions of the US, the EU, the UK, Switzerland, Japan, South Korea and a number of other countries. The effect of sanctions on the Russian economy and its financial market is viewed through the prism of credit, interest rate, and currency risk, and the risk of a decline in business activity. Special attention is paid to the inflationary component (...) and inflationary expectations of the Russian Federation, as well as to the forecasts for a decline in business activity in Russia. A critical assessment is given to the actions of the Central Bank of the Russian Federation and the economic bloc of the government of the Russian Federation as a whole in response to the sanctions of the civilized world, which disable the normal existence of the economy and the main purpose of which is not to destroy the economy of the Russian Federation but to ensure the end of hostilities on the European continent. The results of our study will be useful to everyone who studies the problems of the effect of economic sanctions on the resource-based economy and the processes of stimulating political decisions by economic methods. (shrink)

I argue that epistemic failings are a significant and underappreciated moral hazard in the financial services industry. I argue further that an analysis of these epistemic failings and their means of redress is best developed by identifying policies and procedures that are likely to facilitate good judgment. These policies and procedures are “best epistemic practices.” I explain how best epistemic practices support good reasoning, thereby facilitating accurate judgments about risk and reward. Failures to promote and adhere to best epistemic (...) practices contributed to the 2008 financial crisis. I identify and discuss some of the ways in which best epistemic practices were violated in the events that led to the crisis, with a focus on the role of the credit rating agencies. I go on to discuss some of the ways in which these failings have been redressed. I conclude by observing how proactive regulation for best epistemic practices might help us to anticipate and avoid future crises. (shrink)

Clearing algorithms are at the core of modern payment systems, facilitating the settling of multilateral credit messages with (near) minimum transfers of currency. Traditional clearing procedures use batch processing based on MILP - mixed-integer linear programming algorithms. The MILP approach demands intensive computational resources; moreover, it is also vulnerable to operational risks generated by possible defaults during the inter-batch period. This paper presents TORC3 - the Token-Ring Clearing Algorithm for Currency Circulation. In contrast to the MILP approach, TORC3 is (...) a real time heuristic procedure, demanding modest computational resources, and able to completely shield the clearing operation against the participating agents’ risk of default. (shrink)

Nowadays a lot of new financial instruments for SMEs innovation projects are getting more popular in the business environment. A great number of them are traditional like credit loans at the same time we can observe the appearance of innovative ones. Variable set of financial instruments generalized on fig.1. This classification is giving by Organiztion of Economic Cooperation and Development ( OECD). As we can see from the fig.1 the classification is based on risk approach. For further research (...) it is needed to сlarify these definitions. Firstly, asset based finance is the method of assigning structured turnaround capital and term loans, disbursement of debit portfolio, stocks, machines, funds, and / or real estate. This type of finding is suitable for SMEs beginners, refinancing existing loans, growth financing, mergers and acquisitions. (shrink)

The market for environmental, social and governance (ESG) rating and data is expected to grow immensely in the next decades. This brief zooms in both on the integration of ESG risks into “traditional” operations of Credit Rating Agencies (CRAs) as well as on the emergence of a market exclusively dedicated to ESG rating. As will become clear, the market for ESG ratings suffers from serious shortcomings, a lack of transparency and standardisation, significant biases and conflicts of interests, and a (...) dependence on large, oligopolistic, credit rating agencies. (shrink)

The objective of this paper is to examine the role of the banking system in the growth of the Vietnamese economy in the process of the transition that started in the early 1990s. An ARDL approach-based multivariate regression technique is applied to shed light on the impact on the growth of banking development, which is measured by broad money and bank credit. The empirical findings confirm a positive long-term effect of banking development on growth, reflecting the important role of (...) the banking system in a typical bank-based financial system in mobilizing and supplying capital to the economy, thus contributing to growth throughout the process of economic transition. The empirical findings also indicate a nonlinear effect and a diminishing marginal effect of banking development in the sub-period 2007–2020. The thresholds for the two measures of banking development are estimated to be around 107% and 101% of the GDP, respectively. This finding suggests that bank credit expansion needs to be closely controlled to be adaptive to the capital-absorptive capacity of the economy. To a certain extent, this finding is also an indicator of the ongoing extensive growth model adopted in Vietnam, which relies heavily on the quantity of invested capital. (shrink)

Libertarian self-ownership views in the tradition of Locke, Nozick, and the left-libertarians have supposed that we enjoy very powerful deontological protections against infringing upon our property. Such a conception makes sense when we are focused on property that is very important to its owner, such as a person’s kidney. However, this stringency of our property rights is harder to credit when we consider more trivial infringements such as very mildly toxic pollution or trivial risks such having planes fly overhead. (...) Maintaining that our rights against all infringements are very powerful threatens to implausibly make such pollution and trivial risk broadly impermissible. This paper suggests that self-ownership views have tended to inappropriately conflate the seriousness of different types of infringements and that treating all infringements so seriously is implausible because it would make too much impermissible. I consider several ways to avoid this result within a self-ownership framework and conclude that the best approach is to allow that the strength of the protection against infringements should be tied to the seriousness of the harm of the infringement. (shrink)

Mental accounting is a concept associated with the work of Richard Thaler. According to Thaler, people think of value in relative rather than absolute terms. They derive pleasure not just from an object’s value, but also the quality of the deal – its transaction utility (Thaler, 1985). In addition, humans often fail to fully consider opportunity costs (tradeoffs) and are susceptible to the sunk cost fallacy. Why are people willing to spend more when they pay with a credit card (...) than cash (Prelec & Simester, 2001)? Why would more individuals spend $10 on a theater ticket if they had just lost a $10 bill than if they had to replace a lost ticket worth $10 (Kahneman & Tversky, 1984)? Why are people more likely to spend a small inheritance and invest a large one (Thaler, 1985)? According to the theory of mental accounting, people treat money differently, depending on factors such as the money’s origin and intended use, rather than thinking of it in terms of the “bottom line” as in formal accounting (Thaler, 1999). An important term underlying the theory is fungibility, the fact that all money is interchangable and has no labels. In mental accounting, people treat assets as less fungible than they really are. Even seasoned investors are susceptible to this bias when they view recent gains as disposable “house money” (Thaler & Johnson, 1990) that can be used in high-risk investments. In doing so, they make decisions on each mental account separately, losing out the big picture of the portfolio. (See also partitioning and pain of paying for ideas related to mental accounting.) . (shrink)

Termination in international contracts is considered a harsh sanction that harms international trade for each breach of contract or its provisions. The interest of international trade is fulfilled in maintaining and completing performance of contract, even if with a breach rectifiable by remedy. The termination destroys the contract and results in returning goods after their dispatch in addition to the accompanying new freight and insurance expenses and administrative and health procedures necessary for the entry and exit of goods and to (...) pay then refund the price. Moreover, the goods are exposed again to damage and perishing risks. Furthermore, the international sale contract is inherently associated with other international contracts such as goods transport contract, insurance contract and documentary credit through which the price is paid. If the sale contract is terminated, its effect will apply to all other associated contracts, if not performed, which produces many issues and hardships. (shrink)

This thesis consists of three papers examining determinants and implications of related party transactions (RPTs) in Vietnam, a transitional economy in South East Asia with features of concentrated state ownership and weak minority investor protection. Specifically, these papers describe RPTs and examine (i) the association between RPTs and state ownership, (ii) the association between the cost of corporate debt and RPTs, and the moderating role of state ownership on the association between the cost of debt and RPTs, and (iii) the (...) association between corporate tax avoidance and RPTs, and the moderating role of state ownership on this potential association. The first paper describes the nature and extent of RPTs in Vietnamese listed firms and examines the association between RPTs and state ownership. The results from this paper demonstrate that related party transactions are prevalent in Vietnam. Findings show that the presence of state ownership is related to a lower extent of RPTs. However, among firms with state ownership, the extent of RPTs is positively associated with percentage of state ownership. The second paper reveals that the cost of debt is higher in firms having a higher level of RPTs, implying that RPTs are viewed as a potential risk to firms from the point of view of lenders. However, the presence of state ownership can reduce the effect of RPTs on the cost of debt. The third paper provides evidence that firms with RPTs demonstrate more tax avoidance than their counterparts without RPTs. Further, among firms with RPTs, firms with a higher extent of related net credit and related sales are found to exhibit even higher levels of tax avoidance. However, the association between tax avoidance and RPTs is moderated by the presence of state ownership. Finally, in firms with RPTs, the presence of state ownership reduces tax avoidance measured by effective tax rates. (shrink)

A method of identifying banks’ business models and studying the features of their risk profile, considering the system of indicators featuring the structure of assets, liabilities, income, expenses, and other qualitative indicators based on monthly statistical reporting. Kohonen's self-organizing maps (SOM) are used to process large data sets, revealing objects’ hidden features by forming homogeneous groups according to similar values of a large system of indicators. The choice of the system of indicators that play the most significant role in (...) describing the business models of modern banks is substantiated. The proposed method makes it possible to group banks with homogeneous characteristics into so-called structural-functional groups and studies the change in the characteristics of groups of banks over time to compare their behavior during periods of active development of the system and during a crisis. That approach is useful for studying the banking system at the macro level, as it provides a quantitative measure of its financial stability. The more banks are in groups with negative values of parameters, increased risks, and unprofitable performance, the worse the general state of the system. The method also allows studying the features of each structural and functional group and the business models’ features at the meso-level. The number and composition of banks inherent in any group change dynamically, which characterizes the features of the relevant business model in a particular period. The averages of each group reflect the objective changes in the banking system structure. In addition, the SOM trajectory can be built for each individual bank determining the development of its strategy, features of a particular business model, and risk profile. At the micro-level, it allows comparing the features of individual banks within the SFGB and models ways to improve efficiency and financial stability by forecast values for SOM. An extensive system of indicators used to form structural and functional groups of banks allows to quickly respond to changes in the banking system, identify areas of increased risk and explore the adequacy and effectiveness of banks’ business models. (shrink)

The article examines the process of formation inventory of the enterprise and determines the optimal volume of commodity resources for sale. A generalization of author’s approaches to the formation and evaluation of inventories of the enterprise is carried out. The marketing-logistic approach was applied for the purpose of distribution groups of commodity resources due to the risk of non-fulfillment the order for the supply of goods of the enterprise. In order to ensure an effective process of commodity provision of (...) the enterprises, the costs associated with the formation of inventories are determined. The formalized scheme of the formation commodity provision and the process of optimization inventory of the enterprise is offered. The analysis the structure of the company’s inventory is carried out, the volume of goods turnover is defined, the stocks are grouped for various clustering characteristics. To conduct the study, statistical information was used on commodity resources of the enterprises, statistical methods (grouping, structure analysis, estimation of dynamic series), tools for assessing the efficiency of inventory use, HML-FMR clustering were used. The necessity of using XYZ and ABC analysis is indicated in order to obtain more reliable results and forecast values of the product support of the enterprise. Economic-mathematical modeling is applied and graphically shown the difference in the formation of commodity resources by various features of HML-FMR clustering. The calculations allow the enterprise to determine the optimal amount of commodity resources in accordance with the needs of consumers and their solvent demand, to plan financial resources for the formation of inventories, to develop assortment policy in accordance with demand for products and their implementation. The results of calculations the volume of merchandising of the enterprise, taking into account the HML-FMR clustering affect the formation of final financial performance of the enterprise — income and profits. (shrink)

This paper studies the issue of financing the Space Industry at the State Level in the Postwar period as part of the country’s recovery plan, as one of the foremost critical zones of technological development and to ensure space security and defence. The European Space Agency (ESA) is, identified as the main player in the European space sector. It is determined that the current structure of ESA – Space 4.0 – provides for the success of European space activities in close (...) coordination with the needs of European societies and economies. Despite all the prospects, offered by the Space Industry, a number of barriers can hinder full participation in the space economy. These ‘barriers’ include the requirement of large capital investments, technological risk and longer de-velopment times. Public-private partnerships have been, identified, as an effective way to overcome these barriers, so the government should play an important role in pro-moting innovation through the space sector. The war in Ukraine, which began on Feb-ruary 24, 2022, once again, reminds us of the unique value, and critical use of outer space for security and defence purposes. From intelligence gathering and monitoring to the availability of communications. It is determined that the war already has serious consequences for the European space sector. The Space Industry of Ukraine is a critical component of the national economy of Ukraine because it is the motor of numerous imaginative changes in other segments of the economy and contributes to the improve-ment of social, political, financial and natural circles of society. In Ukraine, there's an incessant disappointment in the State to fulfil its commitments to the ventures in the Space Industry. In the conditions of full-scale, ‘war’ the Space Industry isa key element of national security and defence of Ukraine. The financing of the Space Industry at the State level in the post-war period is crucial as part of the country’s recovery plan. (shrink)

The paper begins by reviewing two problems for fallibilism: the lottery problem, or the problem of explaining why fallible evidence, though otherwise excellent, is not enough to know that one will lose the lottery, and Gettier problems. It is then argued that both problems can be resolved if we note an important illocutionary force of knowledge attributions: namely, that when we attribute knowledge to someone we mean to give the person credit for getting things right. Alternatively, to say that (...) a person knows is to say that she got things right due to her own abilities, efforts and actions, rather than due to dumb luck, or blind chance, or something else. (shrink)

A small but growing number of studies have aimed to understand, assess and reduce existential risks, or risks that threaten the continued existence of mankind. However, most attention has been focused on known and tangible risks. This paper proposes a heuristic for reducing the risk of black swan extinction events. These events are, as the name suggests, stochastic and unforeseen when they happen. Decision theory based on a fixed model of possible outcomes cannot properly deal with this kind of (...) event. Neither can probabilistic risk analysis. This paper will argue that the approach that is referred to as engineering safety could be applied to reducing the risk from black swan extinction events. It will also propose a conceptual sketch of how such a strategy may be implemented: isolated, self-sufficient, and continuously manned underground refuges. Some characteristics of such refuges are also described, in particular the psychosocial aspects. Furthermore, it is argued that this implementation of the engineering safety strategy safety barriers would be effective and plausible and could reduce the risk of an extinction event in a wide range of possible scenarios. Considering the staggering opportunity cost of an existential catastrophe, such strategies ought to be explored more vigorously. (shrink)

In addition to protecting agents’ autonomy, consent plays a crucial social role: it enables agents to secure partners in valuable interactions that would be prohibitively morally risk otherwise. To do this, consent must be observable: agents must be able to track the facts about whether they have received a consent-based permission. I argue that this morally justifies a consent-practice on which communicating that one consents is sufficient for consent, but also generates robust constraints on what sorts of behaviors can (...) be taken as consent- communicating. (shrink)

In this paper, I show that Polleit and Mariano (2011) are right in concluding that Credit Default Swaps (CDS) are per se unobjectionable from Rothbard’s libertarian perspective on property rights and contract theory, but that they fail to derive this conclusion properly. I therefore outline the proper explanation. In addition, though Polleit and Mariano are correct in pointing out that speculation with CDS can conceivably hurt the borrowers’ interests, they fail to grasp that this can be the case only (...) in some peculiar circumstances that I identify. In other words, they miss the bigger picture, the one outside special circumstances, in which CDS trading has the opposite effect. That is, CDS facilitate debt accumulation, including government debt accumulation. Finally, I point out how this can precipitate the collapse of fiat money regimes. An incidental goal of the analysis is to provide a better account than Polleit and Mariano of recent government interventions in and around CDS markets. (shrink)

The notion of credit plays a central role in virtue epistemology and in the literature on moral worth. While virtue epistemologists and ethicists have devoted a significant amount of work to providing an account of creditable success, a unified theory of credit applicable to both epistemology and ethics, as well as a discussion of the general form it should take, are largely missing from the literature. Our goal is to lay out a theory of credit that seems (...) to underlie much of the discussion in virtue epistemology, which we dub the Cake Theory. We argue that given the goals that virtue epistemologists and ethicists who discuss moral worth have, this theory is problematic, for it makes credit depend on the wrong facts. (shrink)

Catastrophic risk raises questions that are not only of practical importance, but also of great philosophical interest, such as how to define catastrophe and what distinguishes catastrophic outcomes from non-catastrophic ones. Catastrophic risk also raises questions about how to rationally respond to such risks. How to rationally respond arguably partly depends on the severity of the uncertainty, for instance, whether quantitative probabilistic information is available, or whether only comparative likelihood information is available, or neither type of information. Finally, (...) catastrophic risk raises important ethical questions about what to do when catastrophe avoidance conflicts with equity promotion. (shrink)

This study contributes to the micro-credit literature by addressing the lack of philosophical dialogue concerning the issue of trust between micro-credit NGOs and rural poor women. The study demonstrates that one of the root causes of NGOs’ contested roles in Bangladesh is the norm that they use (i.e., trust) to rationalize their micro-credit activities. I argue that Bangladeshi micro-credit NGOs’ trust in poor village women is not genuine because they resort to group responsibility sustained through aggressive (...) surveillance. I maintain so by drawing on a trust-based theoretical framework that uses various philosophical insights. Drawing on the same conceptual framework, I also contend, somewhat softening the previous claim, that if micro-credit trust is trust at all, it is at most strategic, not generalized. For being strategic, it has many undermining effects on local social solidarity norms, rendering Bangladeshi micro-credit NGOs and strategic trust an odd couple with no moral compass. To bring forth the moral impetus in micro-credit activities, I lay out some recommendations intended for organizations, managers, and policymakers, consistent with normative corporate social responsibility initiatives. However, further studies can be initiated based on this paper, suggesting its importance for future research. (shrink)

This article argues that Lara Buchak’s risk-weighted expected utility (REU) theory fails to offer a true alternative to expected utility theory. Under commonly held assumptions about dynamic choice and the framing of decision problems, rational agents are guided by their attitudes to temporally extended courses of action. If so, REU theory makes approximately the same recommendations as expected utility theory. Being more permissive about dynamic choice or framing, however, undermines the theory’s claim to capturing a steady choice disposition in (...) the face of risk. I argue that this poses a challenge to alternatives to expected utility theory more generally. (shrink)

The standard argument to the conclusion that artificial intelligence (AI) constitutes an existential risk for the human species uses two premises: (1) AI may reach superintelligent levels, at which point we humans lose control (the ‘singularity claim’); (2) Any level of intelligence can go along with any goal (the ‘orthogonality thesis’). We find that the singularity claim requires a notion of ‘general intelligence’, while the orthogonality thesis requires a notion of ‘instrumental intelligence’. If this interpretation is correct, they cannot (...) be joined as premises and the argument for the existential risk of AI turns out invalid. If the interpretation is incorrect and both premises use the same notion of intelligence, then at least one of the premises is false and the orthogonality thesis remains itself orthogonal to the argument to existential risk from AI. In either case, the standard argument for existential risk from AI is not sound.—Having said that, there remains a risk of instrumental AI to cause very significant damage if designed or used badly, though this is not due to superintelligence or a singularity. (shrink)

A growing number of decision theorists have, in recent years, defended the view that rationality is permissive under risk: Different rational agents may be more or less risk-averse or risk-inclined. This can result in them making different choices under risk even if they value outcomes in exactly the same way. One pressing question that arises once we grant such permissiveness is what attitude to risk we should implement when choosing on behalf of other people. Are (...) we permitted to implement any of the rationally permissible risk attitudes, is there some specific risk attitude that is required when choosing for others, or are we required to defer to the risk attitudes of the people on whose behalf we are choosing? This article elaborates on this question, explains its wider practical and theoretical significance, provides an overview of existing answers, and explores how to go about providing a more systematic account of how to choose on behalf of others in risky contexts. (shrink)

The credit crises experienced in the US in year 2008 is labeled as perhaps the most significant crises since the great depression. The roots of the crises were found in the default of the sub-prime mortgages and the failure occurred in both the US and the UK. Due to the integrated nature of international financial systems the spillover impacted many countries as the economies in Asia and Europe were purchasers of the sub-prime mortgages that originated in both UK and (...) US. The impact of the credit crises in Canada is of unique importance due to the close proximity to US, and both the US and Canada being of great strategic importance to each other as well as one of the largest trading partners.Even though the international financial credit crises adversely impacted many countries, the evidence that has come across recent years point towards the conclusion that Canada was able to weather the crises much better than many other countries. (shrink)

The paper re-expresses arguments against the normative validity of expected utility theory in Robin Pope (1983, 1991a, 1991b, 1985, 1995, 2000, 2001, 2005, 2006, 2007). These concern the neglect of the evolving stages of knowledge ahead (stages of what the future will bring). Such evolution is fundamental to an experience of risk, yet not consistently incorporated even in axiomatised temporal versions of expected utility. Its neglect entails a disregard of emotional and financial effects on well-being before a particular (...) class='Hi'>risk is resolved. These arguments are complemented with an analysis of the essential uniqueness property in the context of temporal and atemporal expected utility theory and a proof of the absence of a limit property natural in an axiomatised approach to temporal expected utility theory. Problems of the time structure of risk are investigated in a simple temporal framework restricted to a subclass of temporal lotteries in the sense of David Kreps and Evan Porteus (1978). This subclass is narrow but wide enough to discuss basic issues. It will be shown that there are serious objections against the modification of expected utility theory axiomatised by Kreps and Porteus (1978, 1979). By contrast the umbrella theory proffered by Pope that she has now termed SKAT, the Stages of Knowledge Ahead Theory, offers an epistemically consistent framework within which to construct particular models to deal with particular decision situations. A model by Caplin and Leahy (2001) will also be discussed and contrasted with the modelling within SKAT (Pope, Leopold and Leitner 2007). (shrink)

I have claimed that risk-weighted expected utility maximizers are rational, and that their preferences cannot be captured by expected utility theory. Richard Pettigrew and Rachael Briggs have recently challenged these claims. Both authors argue that only EU-maximizers are rational. In addition, Pettigrew argues that the preferences of REU-maximizers can indeed be captured by EU theory, and Briggs argues that REU-maximizers lose a valuable tool for simplifying their decision problems. I hold that their arguments do not succeed and that my (...) original claims still stand. However, their arguments do highlight some costs of REU theory. (shrink)