Operational Risk Capital Models enables you to model your operational risk capital to ensure the model meets regulatory standards. It describes the process end to end, from the capture of the required data to the modelling and VaR calculation, as well as the integration of capital results into your institution s daily risk management.
Chapters include:
- Modelling Challenges
- Regulatory Compliance and Supervision
- Operational Loss Modelling
- External Data Rescaling
- Scenario Analysis Framework and Modelling
- BEICFs Modelling and Integration into Capital Model
- Capital Results Integration into Business Planning and Risk Appetite
- Hybrid Model Construction: Integrating ILD, ED and SA
Operational Risk Capital Models is essential for the creation of op risk capital models for both regulatory compliance and improving risk management practices.The book addresses and resolves the challenges in the implementation of advanced operational risk capital models by presenting a highly detailed end-to-end process for the capital model construction, compliance and integration into management.
The first part of the book describes a robust framework for the definition and capture of the four data elements: Internal Loss Data, External Data, Scenario Analysis and Business Environment Internal Control Factors.
The second part presents the exhaustive modelling and integration of the four data elements to compute operational risk VaR, capital and depict the operational risk profile of the institution.
In the third part, the work turns into the integration of capital results into the day to day management: embedding of the operational risk profile into strategic and operational business planning process; operational risk appetite definition, cascading down, monitoring and adherence; and the risk/reward evaluation of the effectiveness of controls and mitigation plans (insurance, action plans, critical infrastructure protection, operational risk predictive models and the determination of the optimal mitigation strategy using adversarial risk analysis).
Finally, the book's appendices examine in detail the distributions used in operational risk modelling including truncated, shifted, mixtures, empirical and plain vanilla parametric distributions; different credibility theory models, optimization methods used in operational risk modelling and business risk modelling.
