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

Dominique Guegan () and Bertrand K. Hassani ()
Additional contact information
Dominique Guegan: Centre d'Economie de la Sorbonne, https://cv.archives-ouvertes.fr/dominique-guegan
Bertrand K. Hassani: BPCE et Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.cnrs.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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; excepted shortfall (search for similar items in EconPapers)
JEL-codes: C18 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2011-09
New Economics Papers: this item is included in nep-ban and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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ftp://mse.univ-paris1.fr/pub/mse/CES2011/11057.pdf (application/pdf)

Related works:
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:mse:cesdoc:11057

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