Implications of Alternative Operational Risk Modeling Techniques

Patrick de Fontnouvelle, John Jordan and Eric Rosengren ()

No 11103, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G2 (search for similar items in EconPapers)
Date: 2005-02
New Economics Papers: this item is included in nep-fin and nep-rmg
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as Carey, Mark and Rene M. Stulz (eds.) The Risks of Financial Institutions A National Bureau of Economic Research Conference Report. Chicago and London: University of Chicago Press, 2006.
Published as Implications of Alternative Operational Risk Modeling Techniques , Patrick de Fontnouvelle, Eric Rosengren, John Jordan. in The Risks of Financial Institutions , Carey and Stulz. 2006

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Related works:
Chapter: Implications of Alternative Operational Risk Modeling Techniques (2007)
Working Paper: Implications of alternative operational risk modeling techniques (2004)
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