A new algorithm for the loss distribution function with applications to Operational Risk Management
AbstractOperational risks inside banks and insurance companies is currently an important task. The computation of a risk measure associated to these risks lies on the knowledge of the so-called Loss Distribution Function. Traditionally this distribution function is computed via the Panjer algorithm which is an iterative algorithm. In this paper, we propose an adaptation of this last algorithm in order to improve the computation of convolutions between Panjer class distributions and continuous distributions. This new approach permits to reduce drastically the variance of the estimated VAR associated to the operational risks.
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Bibliographic InfoPaper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00384398.
Date of creation: Nov 2009
Date of revision:
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Operational risk; Panjer algorithm; Kernel; numerical integration; convolution.;
Other versions of this item:
- Dominique Guegan & Bertrand Hassani, 2009. "A new algorithm for the loss distribution function with applications to Operational Risk Management," Documents de travail du Centre d'Economie de la Sorbonne, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 09023, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Nov 2009.
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
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