Operational Risk Modeling: An Evaluation of Competing Strategies

50 Pages Posted: 30 Mar 2011

See all articles by Sandra Paterlini

Sandra Paterlini

University of Trento - Department of Economics and Management

Stefan Mittnik

University of Kiel - Institute of Statistics & Econometrics; Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Tina Yener

Ludwig Maximilians University of Munich

Date Written: April 1, 2010

Abstract

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.

Keywords: Mutual funds, Expense ratios, Price sensitivity

JEL Classification: G11, G23

Suggested Citation

Paterlini, Sandra and Mittnik, Stefan and Yener, Tina, Operational Risk Modeling: An Evaluation of Competing Strategies (April 1, 2010). CAREFIN Research Paper No. 06/2010. Available at SSRN: https://ssrn.com/abstract=1798614

Sandra Paterlini (Contact Author)

University of Trento - Department of Economics and Management ( email )

Via Inama 5
Trento, I-38100
Italy

Stefan Mittnik

University of Kiel - Institute of Statistics & Econometrics ( email )

Olshausenstr. 40
Kiel, Schleswig-Holstein 24118
Germany

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Akademiestr.1/III
Munich, D-80539
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Tina Yener

Ludwig Maximilians University of Munich ( email )

Ludwigstr. 33
Munchen, D-80539
Germany

HOME PAGE: http://www.stat.uni-muenchen.de/

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