Technical paper/Operational risk
The benefit of using random matrix theory to fit high-dimensional t-copulas
This paper uses simulation studies and an example of operational risk modeling to show the necessity and benefit of using RMT to fit high-dimensional t-copulas in risk modeling.
Operational risk and the Solvency II capital aggregation formula: implications of the hidden correlation assumptions
The authors of this paper analyze the Solvency II standard formula for capital risk aggregation in relation to the treatment of operational risk capital.
Comments on the Basel Committee on Banking Supervision proposal for a new standardized approach for operational risk
In this paper, the behavior of the SMA is studied under a variety of hypothetical and realistic conditions, showing that the simplicity of the new approach is very costly.
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
A simulation comparison of aggregation periods for estimating correlations within operational loss data
This paper investigates the differences in the values of correlations based on different aggregation periods of time series loss data.
Operational risk: impact assessment of the revised standardized approach on Indian banks
This paper focuses on a comparison of the capital for Indian banks as required by the current regime for capital charge calculation, versus the possible revised Standardised Approach.
Bank fraud and the macroeconomy
This paper empirically tests for correlations between fraud and the macroeconomy.
A maximum entropy approach to the loss data aggregation problem
This paper examines and compares alternative ways of solving the problem of determining the density of aggregate losses.
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.
Diversification benefit of operational risk
Torresetti and Le Pera explore the relevance of the diversification benefit from a theoretical and practical viewpoint
Modeling operational risk capital: the inconvenient truth
This paper shows that it is an "inconvenient truth" that the largest losses by banks are not firm specific.
Application of the convolution operator for scenario integration with loss data in operational risk modeling
This paper addresses the uncertainty in scenario analysis and produces a combined loss distribution.
A comparison of alternative mixing models for external data in operational risk
This paper studies alternative mixing models for external data for a particular risk class.
Outsourcing risk: a separate operational risk category?
This paper identifies three steps in sourcing risk.
Truncated lognormals as a power-law mimic in operational risk
This paper makes use of the power-law mimicry properties of the truncated lognormal distribution and shows how they fit operational risk data considerably well.
A weighted likelihood estimator for operational risk data: improving the accuracy of capital estimates by robustifying maximum likelihood estimates
This paper proposes the use of a robust generalization of MLEs for the modeling of operational loss data.
Mitigating rogue-trading behavior by means of appropriate, effective operational risk management
This paper discusses the violation of applicable firm guidelines by individuals employed by a bank or financial institution and suggests specific metrics to identify and prevent such behaviour.
Monitoring IT operational risks across US capital markets
This paper suggests an approach for assessing IT risk through an incident-based method for monitoring operational IT risk across an extended enterprise based on the ISACA Risk IT framework.
Bayesian operational risk models
This paper proposes a methodology to frame risk self-assessment data into suitable prior distributions that can produce posterior distributions from which accurate operational risk measures.
A simple, transparent and rational weighting approach to combining different operational risk data sources
The authors propose a generic weighting function based on a nonparametric approach that can be used to weight the different distributions.
Scaling operational loss data and its systemic risk implications
A scaling methodology to include external data in operational risk calculation is introduced