On the Selection of Loss Severity Distributions to Model Operational Risk

@article{Hadley2019OnTS,
  title={On the Selection of Loss Severity Distributions to Model Operational Risk},
  author={Daniel P. Hadley and Harry Joe and Natalia Nolde},
  journal={ERN: Commercial Banks (Topic)},
  year={2019}
}
Accurate modeling of operational risk is important for a bank and the finance industry as a whole to prepare for potentially catastrophic losses. One approach to modeling operational is the loss distribution approach, which requires a bank to group operational losses into risk categories and select a loss frequency and severity distribution for each category. This approach estimates the annual operational loss distribution, and a bank must set aside capital, called regulatory capital, equal to… Expand

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