Technical paper/Operational risk
Modeling very large losses
In this paper, the author presents a simple probabilistic model for aggregating very large losses into a loss collection.
Bridging networks, systems and controls frameworks for cybersecurity curriculums and standards development
This paper proposes a risk management framework designed to facilitate the alignment, integration and streamlining of professional practice standards and computer science/cybersecurity educational curriculums by bridging NPNATFs, SNIFs and RMCPFs.
Tail dependence in small samples: from theory to practice
In this paper, the authors study tail dependence by defining the conditions required for all the methods used to perform and to quantify their efficiency and accuracy.
Shapley allocation, diversification and services in operational risk
In this paper, the authors propose a method of allocating operational risk regulatory capital using a closed-form Shapley method, applicable to a large number of business units (BUs).
Modeling catastrophic operational risk using a compound Neyman–Scott clustering model
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.
The absence of evidence and the evidence of absence: an algorithmic approach for identifying operational outages in TARGET2
This paper implements an algorithmic approach to identify participants’operational outages based on transaction data.
The impact of de-tiering in the United Kingdom’s large-value payment system
The authors conduct a head-to-head comparison of central and bilateral clearing to evaluate the impact of market structure on market stability.
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…
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.
An operational risk-based regime-switching model for stock prices
This paper proposes a new risk-based regime-switching model for stock prices to examine the impact of operational risk events on stock prices.
On a family of weighted Cramér–von Mises goodness-of-fit tests in operational risk modeling
This paper applies classical theory to determine if limiting distributions exist for WCvM test statistics under a simple null hypothesis.
Various approximations of the total aggregate loss quantile function with application to operational risk
This paper investigates the mechanics of the empirical aggregate loss bootstrap distribution.
A structural model for estimating losses associated with the mis-selling of retail banking products
In this paper, a structural model is presented for estimating losses associated with the mis-selling of retail banking products. It is the first paper to consider factor-based modeling for this operational/conduct risk scenario.
Operational risk and the three lines of defence in UK financial institutions: is three really the magic number?
This paper examines the three lines of defence in the context of ORM in UK financial institutions.
Hidden Markov regimes in operational loss data: application to the recent financial crisis
The authors propose a method to consider business cycles in the computation of capital for operational risk.
A nonlinear analysis of operational risk events in Australian banks
This paper proposes a methodology applied to complex systems to analyze operational risk events in Australian banks.
The death of one thousand flowers or the AMA reborn?
The author of this paper explores the reasons for the pending demise of the advanced measurement approach (AMA) to operational risk.
Optimal B-robust posterior distributions for operational risk
The aim of this paper is to integrate prior information into a robust parameter estimation via OBR-estimating functions.
The benefit of using random matrix theory to fit high-dimensional t-copulas
This paper uses simulation studies and an example of operational risk modeling to show the necessity and benefit of using RMT to fit high-dimensional t-copulas in risk modeling.
Operational risk and the Solvency II capital aggregation formula: implications of the hidden correlation assumptions
The authors of this paper analyze the Solvency II standard formula for capital risk aggregation in relation to the treatment of operational risk capital.
Comments on the Basel Committee on Banking Supervision proposal for a new standardized approach for operational risk
In this paper, the behavior of the SMA is studied under a variety of hypothetical and realistic conditions, showing that the simplicity of the new approach is very costly.
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.
Operational risk modelled analytically II: classification invariance
In a simple model, Vivien Brunel establishes the properties of an operational risk model under the requirement of classification invariance
A simulation comparison of aggregation periods for estimating correlations within operational loss data
This paper investigates the differences in the values of correlations based on different aggregation periods of time series loss data.