Tail dependency in op risk models

Ahraz Sheikh and John Gavin consider dependency modelling issues arising from the loss distribution approach, contrasting the parametric dependency structure and the stand-alone calculation approaches

This article is concerned with dependency modelling issues arising from the loss distribution approach (LDA). It contrasts two different approaches for modelling tail dependencies in operational risk: the parametric dependency structure approach, which attempts to incorporate dependencies into the LDA based solely on a mathematical formula, and the stand-alone capital calculation approach, which