Truncated or shifted: US debates loss data collection thresholds in op risk modelling

How low can you go?

Water levels

Operational risk internal loss data modelling has never been a straightforward discipline, and in the early days firms used a wide variety of sophisticated techniques to try to compensate for myriad data flaws. Today, debate is raging over what approach to take – US regulators insist on going back to basics, while in Europe other methodologies continue to evolve.

After an initial rush of enthusiasm for Bayesian techniques and extreme value theory in the early days of the discipline, many

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