Correlation and diversification effects in operational risk modelling

The Correlation Problem Technical Focus

The effects of diversification in operational risk modelling are crucial, particularly when capital computations are performed. Though the Basel Committe on Banking Supervisors’ third consultative paper (CP3) is vague about the correlation that should be expected between, say, internal fraud and damage to physical assets, common sense suggests that operational risk events might be, at least partially, decorrelated. Indeed, that all severe operational risk losses systematically occur

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here:

You are currently unable to copy this content. Please contact [email protected] to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

If you already have an account, please sign in here.

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: