How to Avoid Over-Estimating Capital Charge for Operational Risk?
OperationalRisk - Risk's Newsletter, February 2003
10 Pages Posted: 27 Nov 2007
Abstract
Intense reflections are being conducted at the moment regarding the way to pool heterogeneous data coming from both banks' internal systems and industry-pooled databases. We propose here a sound methodology. As it relies on maximum likelihood principle, it is thus statistically rigorous and should be accepted by supervisors. We believe that it solves the most part of data heterogeneity and scaling issues.
Keywords: Operational risk, capital charge, threshold, conditional distribution, maximum likelihood
JEL Classification: G00
Suggested Citation: Suggested Citation
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