Extreme value theory (EVT)
The heavy burden of regulatory settlements
How a few tail losses can skew capital calculations
Paper of the year: Bakhodir Ergashev, Stefan Mittnik and Evan Sekeris
Paper focuses on dealing with sparse data
Quants weigh up VAR's flawed alternatives
VAR at risk
Capturing fat tails
Financial institutions are more aware of the risks posed by high-impact events since the crisis, but the question is how to encapsulate these in models. Zari Rachev, Boryana Racheva-Iotova and Stoyan Stoyanov discuss three approaches for capturing fat…
An operational model
Scarce and shallow loss data has been the bane of operational risk models historically, but a new paper calls for more work on statistical approaches that could improve their sensitivity. By Peter Madigan
Measures for measures
Consistent quantitative operational risk measurement is vital to the health of banks and financial institutions. Andreas Jobst offers guidance on enhanced market practice and risk measurement standards
Bank of Italy official posts op risk paper
In mid-July, an official from the Bank of Italy posted a paper, The modelling of operational risk: experience with the analysis of the data collected by the Basel Committee, which is beginning to garner attention in international op risk circles.
Bank of Italy official posts op risk paper
In mid-July, an official from the Bank of Italy posted a paper, The modelling of operational risk: experience with the analysis of the data collected by the Basel Committee, which is beginning to garner attention in international op risk circles.
Operational risk versus credit risk: Similarities and differences
Many attempts have been made to adapt credit risk models to quantify operational risk. In this article, Gerrit Jan van den Brink of Dresdner Bank and KPMG's Thomas Kaiser compare op risk and specific credit risk models in terms of input data, methodology…
Exceptional operational risks: Three myths debunked
Are there common features among exceptional operational risks beyond their defining characteristics of rarity and severe consequences?
Minimising extremes
Portfolio diversification often breaks down in stressed market environments, but the co-movement of asset prices in a tail risk regime may be modelled using a coefficient of tail dependence. Here, Yannick Malevergne and Didier Sornette show how such…
The maturity effect on credit risk capital
In a mark-to-market approach to credit risk capital, ratings or spread volatility has the effect of making longer-maturity loans more capital-intensive. This is incorporated in the current Basel II proposals via a maturity adjustment factor. Arguing that…
Op Risk discussion document will reflect shifts in regulator thinking
BASEL - The discussion document on operational risk expected in September from global banking regulators will try to cover all the concerns raised by bankers about this controversial aspect of the Basel II banking accord, regulators said.
Insurers get amber light with some green
BASEL - Global banking regulators have signalled they might agree to a role for operational risk insurance in the Basel II bank capital accord.
The relativity of volatility
Stress testing
Modeling and measuring operational risk
Recent operational risk events such as occurred at Barings, Daiwa, Sumitomo, and other institutions show the importance of measuring and controlling such operational risk. In this paper the authors present a quantitative operational risk measurement…