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A tale of tails: an empirical analysis of loss distribution models for estimating operational risk capital

Kabir Dutta and Jason Perry

No 06-13, Working Papers from Federal Reserve Bank of Boston

Abstract: Operational risk is being considered as an important risk component for financial institutions as evinced by the large sums of capital that are allocated to mitigate this risk. Therefore, risk measurement is of paramount concern for the purposes of capital allocation, hedging, and new product development for risk mitigation. We perform a comprehensive evaluation of commonly used methods and introduce new techniques to measure this risk with respect to various criteria. We find that our newly introduced techniques perform consistently better than the other models we tested.

Keywords: Risk; management (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-fmk and nep-rmg
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Citations: View citations in EconPapers (26)

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