Implications of Alternative Operational Risk Modeling Techniques

Modeling and measuring operational risk

Events such as those which occurred in Barings, Daiwa, and Sumitomo helped focus attention on an important type of risk which a bank runs, the operational risk (OR), which encompasses de®ciencies in information systems and internal controls, and includes legal and personnel events that could result in unexpected losses. This type of risk is closely associated with human error, system failure, f...

Applying Robust Methods to Operational Risk Modeling

New approaches to operational risk modeling

Estimation of economic capital of a financial institution requires modeling of operational losses of the business units of the organization. Operational losses of the financial institution are usually represented as an aggregate sum of the losses incurred by the operational events of the business units. Simulation of these events requires the introduction of a co-dependence structure for a more...

Issues in Operational Risk Capital Modeling

In an effort to bolster soundness standards in banking, the 2006 international regulatory agreement of Basel II requires globally active banks to include operational risk in estimating regulatory and economic capital to be held against major types of risk. This paper discusses practical issues faced by a bank in designing and implementing an operational risk capital model. Focusing on the use o...

Modeling the operational risk in Iranian commercial banks: case study of a private bank

The Basel Committee on Banking Supervision from the Bank for International Settlement classifies banking risks into three main categories including credit risk, market risk, and operational risk. The focus of this study is on the operational risk measurement in Iranian banks. Therefore, issues arising when trying to implement operational risk models in Iran are discussed, and ...