Loss Distribution Approach in Practice

The Basel Handbook: A Guide for Financial Practitioners, edited by Micheal Ong, Risk Books, 2004.

18 Pages Posted: 26 Nov 2007

See all articles by Antoine Frachot

Antoine Frachot

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Olivier Moudoulaud

affiliation not provided to SSRN

Thierry Roncalli

Amundi Asset Management; University of Evry

Abstract

This paper follows the different steps necessary for implementing a LDA in practice: - Step 1: Severity Estimation - Step 2: Frequency Estimation - Step 3: Capital Charge Computations - Step 4: Confidence Interval - Step 5: Self Assessment and Scenario Analysis For each of these steps, we try to give illustrative examples and we gather all demanding mathematics into subsections named Technical Appendix. We hope it will allow for a more reader-friendly paper.

Keywords: Operational risk, estimation, confidence interval, self assesment and scenario analysis

JEL Classification: G00

Suggested Citation

Frachot, Antoine and Moudoulaud, Olivier and Roncalli, Thierry, Loss Distribution Approach in Practice. The Basel Handbook: A Guide for Financial Practitioners, edited by Micheal Ong, Risk Books, 2004.. Available at SSRN: https://ssrn.com/abstract=1032592

Antoine Frachot

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Olivier Moudoulaud

affiliation not provided to SSRN

Thierry Roncalli (Contact Author)

Amundi Asset Management ( email )

90 Boulevard Pasteur
Paris, 75015
France

University of Evry ( email )

Boulevard Francois Mitterrand
F-91025 Evry Cedex
France

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