Loss distribution approaches (LDAs)
Can the AMA be reborn?
Regulators could rescue op risk modelling through Pillar 2, writes former supervisor
Custom models work better for op risks, research finds
Bayesian approach touted for mis-selling and other management failures
Should the advanced measurement approach be replaced with the standardized measurement approach for operational risk?
This paper discusses and studies the weaknesses and pitfalls of the SMA and the implicit relationship between the SMA capital model and systemic risk in the banking sector.
Operational risk modelled analytically II: classification invariance
In a simple model, Vivien Brunel establishes the properties of an operational risk model under the requirement of classification invariance
Even for me, AMA models are too complicated
The AMA doesn’t make any sense – but the idea of a single, simple equation does, writes Ruben Cohen
Correlation of op risk losses could send capital soaring
BB&T auditor's model shows capital measured by LDA might be pushed up by 16–55%
Operational loss with correlated frequency and severity: an analytical approach
To enable autocorrelation in the frequency distribution, this paper proposes a significant generalization of the LDA model that involves treating operational risk as a Lévy jump-diffusion.
European banks face steep op risk capital hike from SMA
Op risk accounts for 28% of US banks’ RWAs, compared with 12% at European banks
A simulation comparison of quantile approximation techniques for compound distributions popular in operational risk
The objective of this paper is to compare numerical approximation techniques in terms of their practical usefulness and potential applicability in an operational risk context.
Evaluating operational risk by an inhomogeneous counting process based on Panjer recursion
This paper proposes a new approach for determining OpVaR using an inhomogeneous counting process based on Panjer recursion as the frequency distribution.
Basel Committee faces hard choices in op risk modelling reform
Reducing model diversity may endanger AMA's risk management benefits
Operational risk modelled analytically
Regulators require banks to use an internal model to compute a capital charge for operational risk, which is thought to be sensitive to assumptions on dependence between losses that still remain a matter of debate. Vivien Brunel proposes an analytical…
The heavy burden of regulatory settlements
How a few tail losses can skew capital calculations
OpRisk North America: Regulators to scrutinise use of external loss data in risk models
AMA guidance coming soon, Fed economist promises
How to make VAR go voom
An amended approach to value-at-risk that focuses on the drivers of risk and the use of agent-based modelling and simulation to capture the bounded rationality of human decision-making
An operational model
Scarce and shallow loss data has been the bane of operational risk models historically, but a new paper calls for more work on statistical approaches that could improve their sensitivity. By Peter Madigan