TY - JOUR
T1 - Practical Methods for Measuring and Managing Operational Risk in the Financial Sector: A Clinical Study
AU - Chapelle, A.
AU - Crama, Y.
AU - Hübner, G.M.B.J.
AU - Peters, J.P.
PY - 2008/1/1
Y1 - 2008/1/1
N2 - This paper analyzes the implications of the advanced measurement approach (ama) for the assessment of operational risk. Through a clinical case study on a matrix of two selected business lines and two event types of a large financial institution, we develop a procedure that addresses the major issues faced by banks in the implementation of the ama. For each cell, we calibrate two truncated distributions functions, one for “normal” losses and the other for the “extreme” losses. In addition, we propose a method to include external data in the framework. We then estimate the impact of operational risk management on bank profitability, through an adapted measure of raroc. The results suggest that substantial savings can be achieved through active management techniques.
AB - This paper analyzes the implications of the advanced measurement approach (ama) for the assessment of operational risk. Through a clinical case study on a matrix of two selected business lines and two event types of a large financial institution, we develop a procedure that addresses the major issues faced by banks in the implementation of the ama. For each cell, we calibrate two truncated distributions functions, one for “normal” losses and the other for the “extreme” losses. In addition, we propose a method to include external data in the framework. We then estimate the impact of operational risk management on bank profitability, through an adapted measure of raroc. The results suggest that substantial savings can be achieved through active management techniques.
U2 - 10.1016/j.jbankfin.2007.09.017
DO - 10.1016/j.jbankfin.2007.09.017
M3 - Article
SN - 0378-4266
VL - 32
SP - 1039
EP - 1061
JO - Journal of Banking & Finance
JF - Journal of Banking & Finance
IS - 6
ER -