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Implications of alternative operational risk modeling techniques

Patrick de Fontnouvelle, John S. Jordan and Eric Rosengren ()

No 04-9, Working Papers from Federal Reserve Bank of Boston

Abstract: Quantification of operational risk has received increased attention with the inclusion of an explicit capital charge for operational risk under the new Basle proposal. The proposal provides significant flexibility for banks to use internal models to estimate their operational risk, and the associated capital needed for unexpected losses. Most banks have used variants of value at risk models that estimate frequency, severity, and loss distributions. This paper examines the empirical regularities in operational loss data. Using loss data from six large internationally active banking institutions, we find that loss data by event types are quite similar across institutions. Furthermore, our results are consistent with economic capital numbers disclosed by some large banks, and also with the results of studies modeling losses using publicly available ?external? loss data.

Keywords: Bank capital; Risk management; Basel capital accord (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (9)

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Related works:
Chapter: Implications of Alternative Operational Risk Modeling Techniques (2007) Downloads
Working Paper: Implications of Alternative Operational Risk Modeling Techniques (2005) Downloads
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