A mathematical resurgence of risk management: an extreme modeling of expert opinions
AbstractThe Operational Risk Advanced Measurement Approach requires financial institutions to use scenarios to model these risks and to evaluate the pertaining capital charges. Considering that a banking group is composed of numerous entities (branches and subsidiaries), and that each one of them is represented by an Operational Risk Manager (ORM), we propose a novel scenario approach based on ORM expertise to collect information and create new data sets focusing on large losses, and the use of the Extreme Value Theory (EVT) to evaluate the corresponding capital allocation. In this paper, we highlight the importance to consider an a priori knowledge of the experts associated to a a posteriori backtesting based on collected incidents.
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Bibliographic InfoPaper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00639666.
Date of creation: Sep 2011
Date of revision:
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Basel II; operational risks; EVT; AMA; expert; Value-at-Risk; expected shortfall;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-21 (All new papers)
- NEP-BAN-2011-11-21 (Banking)
- NEP-RMG-2011-11-21 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dominique Guegan & Bertrand Hassani, 2011. "Operational risk: A Basel II++ step before Basel III," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00639484, HAL.
- Dominique Guegan & Bertrand K. Hassani, 2011. "Operational risk: a Basel II++ step before Basel III," Documents de travail du Centre d'Economie de la Sorbonne 11053, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Dominique Guegan & Bertrand Hassani & Cédric Naud, 2011. "An efficient threshold choice for operational risk capital computation," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00790217, HAL.
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