Multivariate VaRs for Operational Risk Capital Computation: a Vine Structure Approach
The Basel Advanced Measurement Approach requires financial institutions to compute capital requirements on internal data sets. In this paper we introduce a new methodology permitting capital requirements to take into account the embedded dependence structures of operational risks. The loss distributions are provided in a matrix of 56 cells. Constructing a vine architecture, which is a bivariate decomposition of a n-dimensional structure (n > 2), we use this approach to compute multivariate operational risk VaRs. We analyse the results and compare them with classical methodologies based on LDF modelings. Our method is simple to carry out, easy to interpret and complies with the new Basel Committee requirements.
|Date of creation:||Apr 2012|
|Date of revision:|
|Note:||View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00587706|
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- Dominique Guegan & Pierre-André Maugis, 2010. "New Prospects on Vines," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00348884, HAL.
- Dominique Guegan & Pierre-André Maugis, 2010. "An Econometric Study of Vine Copulas," Documents de travail du Centre d'Economie de la Sorbonne 10040, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
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