Operational Risk Modelling: Focus on the Loss Distribution and Scenario-Based Approaches

Giuliana Birindelli and Paola Ferretti

Chapter Chapter 6 in Operational Risk Management in Banks, 2017, pp 133-167 from Palgrave Macmillan

Abstract: Abstract The degree of flexibility that banks have had in operational risk modellingOperational risk modelling has fostered over the years the development of a variety of methods. Currently, these may be related to two categories, namely the loss distribution approach and the scenario-based approach. This chapter aims at analysing the specific features of both the methodologies, highlighting strengths and weaknesses of each one. As it is not possible to state which approach is the best in absolute terms, according to the best practices, the combined use could be the preferable choice.

Keywords: Scenario-based Approach (SBA); Loss Distribution Approach (LDA); Operational riskOperational Risk (OR); External Loss Data; Multivariate Probability Function (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-1-137-59452-5_6

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DOI: 10.1057/978-1-137-59452-5_6

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