Applying Discriminant Analysis To Operational Risk Control Indicators
TRICKS OF THE TRADE
Transforming the qualitative analysis of operational risk into a more quantitative approach is one of the key problems facing operational risk managers.
How can risk managers identify the relevant quantitative risk indicators? How can they weight risk factors to produce a more accurate risk rating for a business line or company?
This article shows how to answer these questions by means of a robust statistical technique known as discriminant analysis.
Solving the problem is important because
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