This paper proposes an approach, called the loss distribution approach with segmented dependence (LDA-SD), which can model the different dependencies of HFLI and LFHI losses in the framework of LDA.
Risk-weighted asset increases follow wave of regulatory sanctions
Ebor especially suited to modelling loss events such as legal claims, say proponents
In this paper, the authors present an alternative quantification technique, so-called exposure-based operational risk (EBOR) models, which aim to replace historical severity curves by measures of current exposures and use event frequencies based on…
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.
In this paper, the authors discuss the hazard generated by OpRisk driven by natural and human-made disasters, and argue the position of the LDA as the most-fitted statistical approach to deal with it.
US banks set for sharp falls in Pillar 1 requirements, but regulator-set add-ons cloud SMA’s impact
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…
In this paper, the authors address the issue of an efficient people-risk capital allocation for financial institutions.
Drop loss categories and correlations and adopt simple loss distribution, advises AMA expert
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.
The issues with the standardized measurement approach and a potential future direction for operational risk capital modeling
This paper discusses the criticism and praise the SMA and AMA have received, respectively, in many recent articles.
In this paper, the author studies how asymptotic normality does, or does not, hold for common severity distributions in operational risk models.
The aim of this paper is to integrate prior information into a robust parameter estimation via OBR-estimating functions.
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Regulators could rescue op risk modelling through Pillar 2, writes former supervisor
Bayesian approach touted for mis-selling and other management failures
Should the advanced measurement approach be replaced with the standardized measurement approach for operational risk?
This paper discusses and studies the weaknesses and pitfalls of the SMA and the implicit relationship between the SMA capital model and systemic risk in the banking sector.
In a simple model, Vivien Brunel establishes the properties of an operational risk model under the requirement of classification invariance
The AMA doesn’t make any sense – but the idea of a single, simple equation does, writes Ruben Cohen
BB&T auditor's model shows capital measured by LDA might be pushed up by 16–55%
To enable autocorrelation in the frequency distribution, this paper proposes a significant generalization of the LDA model that involves treating operational risk as a Lévy jump-diffusion.
Op risk accounts for 28% of US banks’ RWAs, compared with 12% at European banks