IDEAS home Printed from https://ideas.repec.org/a/rsk/journ3/2160909.html
   My bibliography  Save this article

A statistical method to optimize the combination of internal and external data in operational risk measurement

Author

Listed:
  • Silvia Figini
  • Paolo Giudici
  • Pierpaolo Uberti
  • Ani Sanyal

Abstract

ABSTRACT According to the last proposals of the Basel Committee on Banking Supervision, banks are allowed to use the Advanced Measurement Approach (AMA) option for the computation of their capital charge covering operational risks. Among these methods, the Loss Distribution Approach (LDA) is the most sophisticated (see Frachot et al (2001) and Baud et al (2002)). It is widely recognized that calibration on internal data may not suffice for computing an accurate capital charge against operational risk. In other words, internal data should be supplemented with external data. The goal of this paper is to address issues regarding the optimal way to mix internal and external data with regards to frequency and severity. As a result rigorous statistical treatments are required to make internal and external data comparable and to ensure that merging both databases leads to unbiased estimates. We propose a rigorous way to tackle this issue through a statistically optimized methodology.

Suggested Citation

  • Silvia Figini & Paolo Giudici & Pierpaolo Uberti & Ani Sanyal, . "A statistical method to optimize the combination of internal and external data in operational risk measurement," Journal of Operational Risk, Journal of Operational Risk.
    • Handle: RePEc:rsk:journ3:2160909
    as

    Download full text from publisher

    File URL: https://www.risk.net/journal-of-operational-risk/2160909/a-statistical-method-to-optimize-the-combination-of-internal-and-external-data-in-operational-risk-measurement
    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:journ3:2160909. 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.