Abstract
The main objective of this work is to suggest a new method for calculation of regulatory capital required for operational risk as an alternative to the corresponding version advocated by the Basel Committee of Banking Supervision. Our method takes into account genuine dependence among the losses of possible risk units within a financial institution. Our proposal reduces the amount of regulatory capital suggested by Basel Committee, where the risk units are assumed to be perfectly positive-dependent. A simulation study is performed to compare both approaches. Finally, we discuss when Bayesian methods are preferable to the classical ones.
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Acknowledgments
The authors would like to thank Nikolai Kolev, IME-USP, for numerous helpful comments on earlier drafts.
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Requena, G., Delbem, D., Diniz, C. (2015). An Alternative Operational Risk Methodology for Regulatory Capital Calculation. In: Polpo, A., Louzada, F., Rifo, L., Stern, J., Lauretto, M. (eds) Interdisciplinary Bayesian Statistics. Springer Proceedings in Mathematics & Statistics, vol 118. Springer, Cham. https://doi.org/10.1007/978-3-319-12454-4_20
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DOI: https://doi.org/10.1007/978-3-319-12454-4_20
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