Journal of Risk

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Operational risk: analytical results when high-severity losses follow a generalized Pareto distribution (GPD) – a note

Klaus Böcker

ABSTRACT

This is a brief supplement to Böcker and Klüppelberg (2005), “Operational VAR: a closed-form approximation,” where a closed-form approximation for operational VAR (OpVAR) was derived. Here, we apply their result to a model in which high-severity losses (ie, losses above a high threshold) follow a generalized Pareto distribution (GPD). Additionally, we give an analytical expression for the expected shortfall of operational risk.

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