Aggregation Issues in Operational Risk

@inproceedings{Giacometti2008AggregationII,
  title={Aggregation Issues in Operational Risk},
  author={Rosella Giacometti},
  year={2008}
}
In this paper we study copula-based models for aggregation of operational risk capital across business lines in a bank. A commonly used method of summation of the value-at-risk (VaR) measures, that relies on a hypothesis of full correlation of losses, becomes inappropriate in the presence of dependence between business lines and may lead to over-estimation of the capital charge. The problem can be further aggravated by the persistence of heavy tails in operational loss data; in some cases, the… CONTINUE READING