Modelling dependence in finance using copulas - Thierry Roncalli's ...
Modelling dependence in finance using copulas - Thierry Roncalli's ...
Modelling dependence in finance using copulas - Thierry Roncalli's ...
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
3.2 Operational risk<br />
Industry def<strong>in</strong>ition = “the risk of direct or <strong>in</strong>direct loss result<strong>in</strong>g from<br />
<strong>in</strong>adequate or failed <strong>in</strong>ternal processs, people and systems or from<br />
external events” (thefts, desasters, etc.).<br />
Operational risk is now explicitly concerned by the New Basel Capital<br />
Accord (banks have to allocate capital for operational risk s<strong>in</strong>ce<br />
2005).<br />
Loss Distribution Approach (LDA) Under this approach, the<br />
bank estimates, for each bus<strong>in</strong>ess l<strong>in</strong>e/risk type cell, the probability<br />
distributions of the severity (s<strong>in</strong>gle event impact) and of the one year<br />
event frequency us<strong>in</strong>g its <strong>in</strong>ternal data. With these two distributions,<br />
the bank then computes the probability distribution of the aggregate<br />
operational loss. The total required capital is the sum of the<br />
Value-at-Risk of each bus<strong>in</strong>ess l<strong>in</strong>e and event type comb<strong>in</strong>ation.<br />
<strong>Modell<strong>in</strong>g</strong> <strong>dependence</strong> <strong>in</strong> f<strong>in</strong>ance us<strong>in</strong>g <strong>copulas</strong><br />
An open field for risk management 3-5
Change language