Implementing loss distribution approach for operational risk
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Publication:3103153
Abstract: To quantify the operational risk capital charge under the current regulatory framework for banking supervision, referred to as Basel II, many banks adopt the Loss Distribution Approach. There are many modeling issues that should be resolved to use the approach in practice. In this paper we review the quantitative methods suggested in literature for implementation of the approach. In particular, the use of the Bayesian inference method that allows to take expert judgement and parameter uncertainty into account, modeling dependence and inclusion of insurance are discussed.
Recommendations
- Modelling operational risk using Bayesian inference.
- Operational risk modelling and management.
- A Bayesian approach to estimate the marginal loss distributions in operational risk management
- A PIECEWISE-DEFINED SEVERITY DISTRIBUTION-BASED LOSS DISTRIBUTION APPROACH TO ESTIMATE OPERATIONAL RISK: EVIDENCE FROM CHINESE NATIONAL COMMERCIAL BANKS
- Numerical modelling of operational risks for the banking industry
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Cited in
(23)- Bayesian copulae distributions, with application to operational risk management
- A note on the estimation of the frequency and severity distribution of operational losses
- A nonparametric operational risk modeling approach based on Cornish-Fisher expansion
- The cost of operational risk loss insurance
- Bayesian estimation of truncated data with applications to operational risk measurement
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- A Bayesian approach to estimate the marginal loss distributions in operational risk management
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- The optimal operational risk capital requirement by applying the advanced measurement approach
- USING WEIGHTED DISTRIBUTIONS TO MODEL OPERATIONAL RISK
- Measuring of inferred loss rate with application to capital adequacy
- Modelling of a loss distribution ansatz in the frame of the advanced measurement approach for optional risk under Basel II.
- Bayesian model choice of grouped t-copula
- Numerical modelling of operational risks for the banking industry
- Asymptotic results for over-dispersed operational risk by using the asymptotic expansion method
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- Practices and issues in operational risk modeling under Basel II
- Robust quantification of the exposure to operational risk: bringing economic sense to economic capital
- Analytic loss distributional approach models for operational risk from the \(\alpha\)-stable doubly stochastic compound processes and implications for capital allocation
- How to model operational risk if you must
- The application of the loss distributed approach to the quantification of operational risk
- Approximation of aggregate and extremal losses within the very heavy tails framework
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