IDEAS home Printed from https://ideas.repec.org/a/rsk/journ3/2160831.html
   My bibliography  Save this article

The Calculation of Minimum Regulatory Capital using Single-Loss Approximations

Author

Listed:
  • Matthias Degen

Abstract

ABSTRACT The calculation of the minimum regulatory capital that a financial institution needs to hold as a buffer to safeguard against adverse business outcomes is a delicate statistical issue. In this paper we highlight problems that may arise and voice a warning against a naive use of mathematical tools. Our focus is on the so-called single-loss approximation used in the operational risk industry for the calculation of minimum regulatory capital. We provide an analytical framework to study the accuracy of this approximation and, as a result, derive an improved method for the calculation of minimum regulatory capital charges. It is not the aim of our paper to advocate the use of such single-loss approximations. Rather, our contribution should be seen as an analytical justification of the essentially empirical findings of a 2006 paper by Böcker and Sprittulla.

Suggested Citation

Handle: RePEc:rsk:journ3:2160831
as

Download full text from publisher

File URL: https://www.risk.net/system/files/import/protected/digital_assets/4648/jop_v5n4a1.pdf
Download Restriction: no
---><---

More about this item

Statistics

Access and download statistics

Corrections

All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rsk:journ3:2160831. See general information about how to correct material in RePEc.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

We have no bibliographic references for this item. You can help adding them by using this form .

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Paine (email available below). General contact details of provider: https://www.risk.net/journal-of-operational-risk .

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.