OpRisk: The challenges of Basel Advanced Approach

• Autor(a) principal: Carloto, Carla Sofia Santos
• Data de Publicação: 2009
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/2013
• topic: Operational Risk; Monte Carlo Simulation; Basel; Capital Adequacy Model for Operational Risk; Risco Operacional; Simulação de Monte Carlo; Acordo de Basileia; Modelo de Adequacidade de Capital de Risco Operacional

Operational Risk is defined by Basel Committee as “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.” Since the beginning, all institutions know that operational risk is present in their activities, but just when Basel Committee introduced as mandatory to have regulatory capital requirements, institutions change their focus from Credit Risk and Market Risk to manage operational risk as a way to reduce regulatory capital. To present some alternative models to be support Advanced Approach, I investigate possible approaches and available statistical distributions that better explain factors/variables like operational risk losses using public data. From the reports published by ORX and FED, I simulate capital requirements using different distributions for each Business Line and Event type, and compare final results and behaviors. The important conclusion of this paper is that is critical to consider all four elements to build a soundness model to estimate capital needs with internal models. The model should be suitable for the reality of institutions rather than be evaluated as the best in statistical measures. More than be regulatory requirement these internal models should be considered an important tool for risk management.