Abstract

http://ssrn.com/abstract=481742
 
 

References (9)



 
 

Citations (9)



 


 



The Quantification of Operational Risk


Markus Leippold


University of Zurich - Department of Banking and Finance; Swiss Finance Institute; University of Zurich - Faculty of Economics, Business Administration and Information Technology

Paolo Vanini


University of Basel; Swiss Finance Institute

November 2003



Abstract:     
We examine the quantification of operational risk for banks. We adopt a financial economics approach and interpret operational risk management as a means of optimizing the profitability of an institution along its value chain. We start by defining operational risk and then propose a framework to model risk mitigation through the bank's value chain over time. Using analytical and numerical methods, we obtain answers concerning capital allocation, network stability, risk figures, and diversification issues. Interpreting the results shows that the usual intuition gained from market and credit risk does not apply to the quantification of operational risk.

Number of Pages in PDF File: 38

Keywords: Operational Risk Management, Stochastic Systems, Diversification, Profitability

JEL Classification: C19, C69, G18, G21


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Date posted: December 30, 2003  

Suggested Citation

Leippold, Markus and Vanini, Paolo, The Quantification of Operational Risk (November 2003). Available at SSRN: http://ssrn.com/abstract=481742 or http://dx.doi.org/10.2139/ssrn.481742

Contact Information

Markus Leippold (Contact Author)
University of Zurich - Department of Banking and Finance ( email )
Plattenstrasse 14
Zürich, 8032
Switzerland
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )
Plattenstrasse 14
Zürich, 8032
Switzerland
Paolo Vanini
University of Basel ( email )
Petersplatz 1
Basel, CH-4003
Switzerland
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
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