Using credibility analysis in operational risk measurement

Continental differences, revisited


In last month's column I started to tackle the methodological differences between US and European banks in measuring operational risk – European banks rely more heavily on scenario analysis, while US banks have been developing models based on internal and external loss data. Basel II requires banks to use all four data types (internal losses, external losses, business control environment factors and scenario analysis) in their risk models, but devising a correct and elegant mathematical method t

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