How to avoid overestimating capital charges for op risk Pooling internal and external data is a central issue to estimating capital charges for operational risk.
Here, Nicolas Baud, Antoine Frachot and Thierry Roncalli of Crédit Lyonnais discuss the methodology they have developed.
References:
Basel Committee on Banking Supervision, Working Paper on the Regulatory Treatment of Operational Risk, September 2001
Basel Committee on Banking Supervision, Quantitative Impact Study 3. Technical Guidance, October 2002
Baud, N, Frachot A, and Roncalli T (2002), Internal data, external data, consortium data: how to mix them for measuring operational risk, Crédit
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