In this paper, the author constructs a capital model for operational risk based on the observation that operational losses can, under a certain dimensional transformation, converge into a single, universal distribution.
Outsize loss events modellable through extension of approach to measuring moderate losses, says research
Drops at Citi, Goldman, Morgan Stanley suggest op risk capital may have peaked
No reason to delay roll-out of standardised approach, says TCH’s Greg Baer
OpRisk North America: non-US banks holding less capital under own-models approach was “a big problem”, says regulator
OpRisk North America: Fed’s annual stress tests are rehabilitating ‘black box’ op risk modelling
Model risk re-enters top 10 amid avalanche of validation regulations
Fed’s cease-and-desist order against Wells Fargo spooks market
US banks set for sharp falls in Pillar 1 requirements, but regulator-set add-ons cloud SMA’s impact
Models will still be needed to measure forward-looking risks under Pillar 2
Collins floor may also prevent Morgan Stanley, State Street and Wells Fargo from realising SMA savings
Demise of AMA leaves industry needing risk-sensitive approach for calculating top-up capital, says consultant
Fall in operational risk weights could push up capital requirements for market and credit risk
Chinese lenders have largest capital requirements in region; banks expect muted increase on average
Analysis suggests big capital savings on average, but uncertainty persists over uneven implementation
European banks could see big jump in capital if losses from legacy businesses are included in SMA
Standardized measurement approach extension to integrate insurance deduction into operational risk capital requirement
The SMA proposed in BCBS (2016) presents several issues: in particular, its two components are not sufficient to discriminate banking institutions by risk profile, thus penalizing the more virtuous ones. This paper describes a possible solution to extend…
Drop loss categories and correlations and adopt simple loss distribution, advises AMA expert
Risk30: From loan losses to electromagnetic pulses, JPMorgan Chase has a place for it
A note on the standard measurement approach versus the loss distribution approach–advanced measurement approach: the dawning of a new regulation
This paper presents a nonexhaustive review of the literature on operational risk quantification under a combination of the loss distribution approach model – the most commonly used of the AMA models – and extreme value theory.
In this paper, the author presents an easy-to-implement, fast and accurate method for approximating extreme quantiles of compound loss distributions (frequency + severity), which are commonly used in insurance and operational risk capital models.
Complexity is slowing roll-out of standards, says Basel Committee deputy