Operational Risk Modeling: An Evaluation of Competing Strategies
EBS Universität für Wirtschaft und Recht
University of Kiel - Institute of Statistics & Econometrics; Ludwig-Maximilians-Universität Munich - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Ludwig Maximilians University of Munich
April 1, 2010
CAREFIN Research Paper No. 06/2010
Being still in its early stages, operational risk modeling has, so far, mainly been concentrated on the marginal distributions of frequencies and severities within the context of the Loss Distribution Approach (LDA). A realistic quantitative model, however, should be capable of modeling the characteristics of the loss distribution while providing stable estimates, incorporating dependencies and overcoming the overly simplistic assumption of a perfect positive correlation among operational losses. The scarcity of available real-world data has prevented the development of best-practice guidelines among practitioners. In this study, drawing on a fairly large real-world data set, we analyze the effects of competing state-of-art strategies in univariate and multivariate modeling for estimating aggregate risk capital.
Number of Pages in PDF File: 50
Keywords: Mutual funds, Expense ratios, Price sensitivity
JEL Classification: G11, G23working papers series
Date posted: March 30, 2011
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