Cyclicality in Catastrophic and Operational Risk Measurements

38 Pages Posted: 7 Nov 2008

See all articles by Linda Allen

Linda Allen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

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Date Written: November 2003

Abstract

Using equity returns for financial institutions we estimate both catastrophic and operational risk measures over the period 1973-2001. We find evidence of cyclical components in both the catastrophic and operational risk measures obtained from the Generalized Pareto Distribution and the Skewed Generalized Error Distribution. Our new, comprehensive approach to measuring operational risk shows that approximately two thirds of financial institutions returns represents compensation for operational risk.

Keywords: operational risk, catastrophic risk, value at risk, extreme value theory, skewed fat tailed distribution

Suggested Citation

Allen, Linda, Cyclicality in Catastrophic and Operational Risk Measurements (November 2003). NYU Working Paper No. S-DRP-03-12. Available at SSRN: https://ssrn.com/abstract=1296367

Linda Allen (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

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HOME PAGE: http://stern.nyu.edu/~lallen

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