Observed correlations and dependencies among operational losses in the ORX consortium database

Eric Cope and Gianluca Antonini

Abstract

ABSTRACT

We survey a range of correlation and dependence measures among operational losses from an international consortium (The Operational Riskdata eXchange (ORX)) of banks. In general, we find little evidence of strong correlations, and some slight evidence of tail dependencies among quarterly aggregate loss values among business line, event type and Basel cell (combination business line/event type) units of measure. The implications for diversification benefits when aggregating losses across units of measure are further explored through direct empirical measurement.