An operational risk capital model based on the loss distribution approach

Ruben D Cohen

Journal of Operational Risk

Abstract: In this paper, we construct a capital model for operational risk based on the observation that operational losses can, under a certain dimensional transformation, converge into a single, universal distribution, as previously established by Cohen in a 2016 paper. Derivation of the model is accomplished by directly applying the loss distribution approach to the transformed data, yielding a calibratable expression for risk capital. The expression, however, is applicable only to nonconduct losses because it incorporates empirical behaviors that are specific to them. For loss data that falls under the conduct category, this approach may not be valid; in such cases, one may have to resort to a different type of modeling technique.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-operational-risk/5 ... istribution-approach (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ3:5603111

Access Statistics for this article

More articles in Journal of Operational Risk from Journal of Operational Risk
Bibliographic data for series maintained by Thomas Paine ().