A mathematical resurgence of risk management: an extreme modeling of expert opinions

Dominique Guegan () and Bertrand Hassani ()
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Dominique Guegan: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Bertrand Hassani: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, BPCE - BPCE

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: The Operational Risk Advanced Measurement Approach requires financial institutions to use scenarios to model these risks and to evaluate the pertaining capital charges. Considering that a banking group is composed of numerous entities (branches and subsidiaries), and that each one of them is represented by an Operational Risk Manager (ORM), we propose a novel scenario approach based on ORM expertise to collect information and create new data sets focusing on large losses, and the use of the Extreme Value Theory (EVT) to evaluate the corresponding capital allocation. In this paper, we highlight the importance to consider an a priori knowledge of the experts associated to a a posteriori backtesting based on collected incidents.

Keywords: Basel II; operational risks; EVT; AMA; expert; Value-at-Risk; expected shortfall; Bâle II; risque opérationnel (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-ban and nep-rmg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00639666
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Citations: View citations in EconPapers (4)

Published in 2011

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Working Paper: A mathematical resurgence of risk management: an extreme modeling of expert opinions (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00639666

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