Implementing Loss Distribution Approach for Operational Risk

Pavel V. Shevchenko

Papers from arXiv.org

Abstract: To quantify the operational risk capital charge under the current regulatory framework for banking supervision, referred to as Basel II, many banks adopt the Loss Distribution Approach. There are many modeling issues that should be resolved to use the approach in practice. In this paper we review the quantitative methods suggested in literature for implementation of the approach. In particular, the use of the Bayesian inference method that allows to take expert judgement and parameter uncertainty into account, modeling dependence and inclusion of insurance are discussed.

Date: 2009-04, Revised 2009-07
New Economics Papers: this item is included in nep-ecm and nep-rmg
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Published in Applied Stochastic Models in Business and Industry (2010), volume 26 issue 3, pages: 277-307

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0904.1805

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