A Bayesian Networks approach to Operational Risk

V. Aquaro, Marco Bardoscia, R. Bellotti, A. Consiglio, F. De Carlo and Giovanni Ferri

Physica A: Statistical Mechanics and its Applications, 2010, vol. 389, issue 8, 1721-1728

Abstract: A system for Operational Risk management based on the computational paradigm of Bayesian Networks is presented. The algorithm allows the construction of a Bayesian Network targeted for each bank and takes into account in a simple and realistic way the correlations among different processes of the bank. The internal losses are averaged over a variable time horizon, so that the correlations at different times are removed, while the correlations at the same time are kept: the averaged losses are thus suitable to perform the learning of the network topology and parameters; since the main aim is to understand the role of the correlations among the losses, the assessments of domain experts are not used. The algorithm has been validated on synthetic time series. It should be stressed that the proposed algorithm has been thought for the practical implementation in a mid or small sized bank, since it has a small impact on the organizational structure of a bank and requires an investment in human resources which is limited to the computational area.

Keywords: Operational Risk; Complex systems; Bayesian Networks; Time series; Value-at-risk; Different-times correlations (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437109010577
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
Working Paper: A Bayesian Networks Approach to Operational Risk (2012)
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:eee:phsmap:v:389:y:2010:i:8:p:1721-1728

DOI: 10.1016/j.physa.2009.12.043

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().