Operational risk versus credit risk: Similarities and differences

Many attempts have been made to adapt credit risk models to quantify operational risk. In this article, Gerrit Jan van den Brink of Dresdner Bank and KPMG's Thomas Kaiser compare op risk and specific credit risk models in terms of input data, methodology as well as output and model validation techniques.

Significant losses due to op risk in recent years, as well as the publication of the Basel Committee’s consultative papers on the new capital adequacy framework, led to the recognition of op risk as a major risk type. Methodologies for measuring its loss potential - needed for subsequent allocation of economic and regulatory capital - are still in the early stages of development. Whereas dissimilarities to market risk are abundant (e.g. unavailability of market data or strong deviation of

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