Using Bayesian Networks to Model Expected and Unexpected Operational Losses

@article{Neil2005UsingBN,
  title={Using Bayesian Networks to Model Expected and Unexpected Operational Losses},
  author={M. Neil and N. Fenton and Manesh Tailor},
  journal={Wiley-Blackwell: Risk Analysis (Archive)},
  year={2005}
}
This report describes the use of Bayesian networks (BNs) to model statistical loss distributions in financial operational risk scenarios. Its focus is on modeling "long" tail, or unexpected, loss events using mixtures of appropriate loss frequency and severity distributions where these mixtures are conditioned on causal variables that model the capability or effectiveness of the underlying controls process. The use of causal modeling is discussed from the perspective of exploiting local… Expand
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