Long-delayed settlements complicate op risk capital models

Delayed impact of 2008 crash means higher capital demands

Marcelo Cruz

Last month, I discussed the huge challenge that operational risk modellers and managers constantly face in explaining the volatility of advanced measurement approach (AMA) results to senior management. As I demonstrated, adding one large loss can cause the operational risk capital requirement to almost double – even if the severity distribution used in the calculations is just the lognormal, not a particullary heavy-tailed distribution.

This operational risk capital sensitivity to large losses c

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