Editor: Marcelo Cruz
Published: 28 Mar 2010
Papers in this issue
by Romar Correa, Swati Raju
by Alessandra Agostini, Paolo Talamo, Vittorio Vecchione
by Donald Erdman, Steven Major, Jacques Rioux
Welcome to the first issue of the fifth volume of The Journal of Operational Risk. With this issue we start the fifth year of our Journal. As we begin a new year for our publication it is the ideal time to communicate a few recent changes. There has been a small reshuffle in our editorial board, with some who had been with us from the start stepping down and new members joining. I would like to thank Donna Howe, Ellen Davis and Elena Medova for their help in these early years in providing guidance on the strategic direction of the Journal and also for helping us to maintain the high quality of our papers by providing input on paper selection. Our gratitude goes to these board members and they have all vowed to continue helping us in a different, less intense, capacity.We welcome three new board members, Victoria Tozer-Pennington, the editor of Operational Risk and Regulation Magazine, Sergio Scandizzo, the head of operational risk at the European Investment Bank and Andrew Sheen of the Financial Services Authority. We have a challenging road ahead in the next few years and their guidance will be extremely important to us.
Regarding the state of operational risk research, there has been a slight decrease in paper submissions recently that can be attributed to the current economic climate. I would like to encourage potential authors to submit to the Journal and would also like to re-emphasize that the Journal is not only intended for academic papers. Our “Forum” section is aimed at discussion of current events without too much emphasis on the technical aspect, formulas and mathematics. We at the Journal would be extremely happy to see more submissions with a focus on practical, current views of relevant matters.
As mentioned in earlier letters, and highlighted in the previous paragraph, we are trying to stimulate practitioners to write their thoughts on operational risk and the current issues in the area without being too stringent on the technical side. For this reason we developed the “Forum” section in which we allow a more free expression of thoughts and more specific industry situations that might be of interest to the community. We are happy to inform that our efforts are bearing fruit and we are publishing two papers in the “Forum” in this issue in addition to two great technical papers.
In the first technical paper, “Combining operational loss data with expert opinions through advanced credibility theory”, Alessandra Agostini, Paolo Talamo and Vittorio Vecchione confirm a trend seen in the Journal of papers that develop models based on credibility theory to combine the four types of data needed to quantify operational risk.
In the second technical paper, “Evaluation of parameter risk via first-order approximation of distortion risk measures”, Donald Erdman, Steven Major and Jacques Rioux address the issue of parameter risk in the loss distribution approach to operational risk management. When the risk measure belongs to the class of distortion risk measures and the asymptotic distribution of the estimate of the parameters is normal, they apply a linearization of the risk measure to examine how parameter changes can be mapped into corresponding risk measure changes. According to the authors, with this methodology it is possible to approximate the confidence interval of the risk measure estimate associated with parameter uncertainty
In the first paper of the forum section, “A model for managing online fraud risk using transaction validation”, Manoj Pandey describes a simple transaction validation model that can be used to manage online banking fraud. It is a very interesting and practically focused paper.
In the second paper of the forum section, “Capital charges for operational risk in the Indian banking sector: alternative measures”, Romar Correa and Swati Raju describe how the new operational risk charges will impact the Indian banking system. Given the growing importance of India in the global economy, we thought that this would be a very interesting subject for a number of readers, not least for the methodology used to assess the country impact of operational risk charges.
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