Practical Calculation of Expected and Unexpected Losses in Operational Risk by Simulation Methods

Enrique, Navarrete (2006): Practical Calculation of Expected and Unexpected Losses in Operational Risk by Simulation Methods. Published in: Banca & Finanzas: Documentos de Trabajo , Vol. I, No. 1 (October 2006): pp. 1-12.

Abstract

This paper explores the difficulties involved in quantitative measurement of operational risk and proposes simulation methods as a practical solution to obtain the distribution of total losses. It also introduces an example of the estimation of expected and unexpected losses, as well as Value-at-Risk (VaR), arising from operational risk.

• Item Type: MPRA Paper
• Institution: Centro de Investigaciones Económicas Nacionales
• Language: English
• Keywords: Operational risk; loss distribution; Value-at-Risk (VaR); simulation methods; Basel II
• Subjects: G - Financial Economics > G0 - General > G00 - General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C15 - Statistical Simulation Methods; Monte Carlo Methods; Bootstrap Methods

References

Basel Committee on Banking Supervision, BCBS (2004), “International Convergence of Capital Measurement and Capital Standards. A Revised Framework”, June 2004.