Quants tout exposure-based approach to op risk modelling

Ebor especially suited to modelling loss events such as legal claims, say proponents

Data

Operational risk modelling has long been viewed as something of an alchemic process, reliant to a greater or lesser degree on making sense of patterns in historical losses to predict future capital requirements. Now, a group of op risk experts is proposing an alternative quantification technique based instead on current exposures and event frequencies – an approach the experts say has longevity for banks, even after the current internal models regime is scrapped.

The approach, dubbed the

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