Functional Similarity of Financial Trajectories for Corporate Bankruptcy Prediction: A k-Nearest Neighbors Approach

Corporate risk prediction is a central problem in financial analysis and corporate risk management. This study proposes a functional approach in which firms are represented through multivariate financial trajectories constructed from retrospective windows of accounting indicators, over which a similarity measure is defined and incorporated into a k-nearest neighbors classifier. The target variable is derived from administrative records, combining reporting discontinuity and firm administrative s