New op risk papers

MEASUREMENT ADVANCES

• Measuring operational risk in financial institutions: contribution of credit risk modeling, by Georges Hubner, University of Liège, HEC Business School; Jean-Philippe Peters, Deloitte Luxembourg; and Severine Plunus, University of Liege – Department of Financial Management.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=687683

According to the authors, the lack of loss data for op risk measurement at many firms is not an insurmountable obstacle. The paper explores the possibility of applying a modified version of CreditRisk+, a popular credit risk model, to operational loss data.

• Process managing operational risk. Developing a concept for adapting process management to the needs of operational risk in the Basel II-framework, by Benedikt Wahler, Johns Hopkins University – Paul H. Nitze School of Advanced International Studies (SAIS).

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=674221

This paper argues that "process management-based methods are appropriate for identifying, evaluating and prioritising, and finally preventing, mitigating and controlling the bank's risk profile".

• Measuring and managing operational risk in the financial sector: an integrated framework, by Ariane Chapelle, Université Libre de Bruxelles; Yves Crama, University of Liege – economics, business administration and social sciences; Georges Hubner, University of Liège, HEC Business School; and Jean-Philippe Peters, Deloitte Luxembourg.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=675186

In this paper, the authors "develop an integrated procedure for the construction of the distribution of aggregate losses, using internal and external data. The authors then estimate the effects of op risk management actions on bank profitability, through a measure of Raroc adapted to op risk.

• On maximum likelihood estimation of operational loss distributions, by Marco Bee, Università degli Studi di Trento – Faculty of Economics.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=678062

This paper "develops a likelihood-based methodology to estimate loss distributions and compute capital at risk in risk management applications".

• Operational risk management in financial institutions: Process assessment in concordance with Basel II, by B Di Renzo, M Hillairet, M Picard, and A Rifaut, Centre de Recherche Public Henri Tudor in Luxembourg; C Bernard, D Hagen, P Maar and D Reinard, Commission de Surveillance du Secteur Financier, Luxembourg.

http://www.cssf.lu/docs/Article_SPICE2005_published.pdf

Luxembourg's national financial supervisory authority and a public research centre have engaged in a joint research project that investigates solutions conformant to ISO/IEC 15504 – an international effort to develop a standard on software process assessment. The two have also developed Basel II operational risk management process reference model 1.00, available at:

http://www.cssf.lu/docs/PRM_ORM_BALEII_V01_00.pdf