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Simulation of Company’s Bankruptcy Probability based on Catastrophe Theory

Affiliations

  • Al-Farabi Kazakh National University, Almaty, 050040, Kazakhstan
  • Narxoz University, Zhandosova, Almaty, 050035, Kazakhstan

Abstract


Objectives: This research addresses the issues of construction of mathematical models to estimate the company’s bankruptcy probability. The aim of the paper is to reveal object behaviour in different situations, all the possible interrelations, principles and conditions of development should be taken into consideration with the models. Methods/Statistical Analysis: The authors suggest the methodology to measure the bankruptcy probability based on the catastrophe theory concepts. The historical analogy approach, methods of comparison study, the catastrophe theory and the multiple correlative-regressive analyses were used as a methodological framework for the research. Findings: In the article, there are findings from the analysis of basic forecasting models for the company’s bankruptcy probability, their main advantages and disadvantages are given too. As a result, the mechanism for a company development simulation using the catastrophe theory was developed. Applications/Improvements: This helps to avoid a crisis and a financial default of a company when a definite forecasting model is made at the appropriate time. The company’s bankruptcy probability analysis can be considered a basic method giving an opportunity to plan future economic status of a company.

Keywords

Bankruptcy, Catastrophe Theory, Financial Stability, Recession, Risks.

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