Operational risk modelled analytically II: classification invariance
Vivien Brunel establishes the properties of an operational risk model under the requirement of classification invariance
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It is critical to have a robust and sound methodology for operational risk assessment and capital measurement. The most common approach for measuring operational risk within a bank – namely the loss distribution approach (LDA) – is based on the frequency and severity estimation from observed events.
However, it is challenging to build accurate and robust estimations in
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