Journal of Operational Risk

Risk.net

Effect of a data collection threshold in the loss distribution approach

Giulio Mignola, Roberto Ugoccioni

ABSTRACT

This paper shows that, in the context of the loss distribution approach to operational risk measurement, neglecting events below the loss data collection threshold does not lead to large errors in the aggregated expected loss, quantiles, and unexpected loss, for threshold values up to fairly large percentiles of the severity distribution.

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