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A Practical Approach To Model Banking Risks Using Loss Distribution Approach (Lda) In Basel Ii Framework

Author

Listed:
  • Raquel BARREIRA
  • Tristan PRYER
  • Qi TANG

Abstract

In Basel II Capital Accord, the Advanced Measurement Approaches (AMA) is stated as one of the pillar stone methods for calculating corporate risk reserves. One of the common yet cumbersome methods is the one known as loss distribution approach (cf. [Chernobai A S, Rachev S T and Fabozzi F J, (2007)]. In this article, we present an easy to implement scheme through electronic means and discuss some of the mathematical problems we encountered in the process together with proposed solution methods and further sought on the issues.

Suggested Citation

  • Raquel BARREIRA & Tristan PRYER & Qi TANG, 2009. "A Practical Approach To Model Banking Risks Using Loss Distribution Approach (Lda) In Basel Ii Framework," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(4(10)_Win), pages 483-493.
  • Handle: RePEc:ush:jaessh:v:4:y:2009:i:4(10)_winter2009:p:81
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    References listed on IDEAS

    as
    1. Pavel Cizek & Wolfgang Karl Härdle & Rafal Weron, 2005. "Statistical Tools for Finance and Insurance," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0501.
    2. Rosenberg, Joshua V. & Schuermann, Til, 2006. "A general approach to integrated risk management with skewed, fat-tailed risks," Journal of Financial Economics, Elsevier, vol. 79(3), pages 569-614, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    loss distribution approach; corporate risk; Basel II principles;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • P - Economic Systems

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