Journal of Operational Risk
ISSN:
1744-6740 (print)
1755-2710 (online)
Editor-in-chief: Marcelo Cruz
Combining scenario analysis with loss data in operational risk quantification
Eric W. Cope
Abstract
ABSTRACT
A method for integrating information obtained from loss data and scenario analysis is presented in this paper. The stochastic process that generates losses within a unit of measure is modeled as a superposition of various subprocesses that characterize individual "loss-generating mechanisms" (LGMs). An end-to-end method is provided for identifying LGMs, performing scenario analysis and combining the outcomes with relevant historical loss data to compute an aggregate loss distribution for the unit of measure. It is shown how the preferred output of scenario analysis can be straightforwardly encoded into a nonparametric Bayesian framework for integration with historical loss data.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net