Typically, operational risk losses are reported above a threshold. Fitting data reported above a constant threshold is a well known and studied problem. However, in practice, the losses are scaled for business and other factors before the fitting and thus the threshold is varying across the...

We consider a compound-Poisson model with Pareto-type claims. In contrast to the classical case, where the claims are assumed to be iid., we assume that scaling and location parameters of the Pareto distribution follow a certain trend. We investigate the impact of this trend on parameter...

To meet the Basel II regulatory requirements for the Advanced Measurement Approaches in operational risk, the bank's internal model should make use of the internal data, relevant external data, scenario analysis and factors reflecting the business environment and internal control systems. One of...

Option written on several foreign exchange rates (FXRs) depends on correlation between the rates. To evaluate the option, historical estimates for correlations can be used but usually they are not stable. More significantly, pricing of the option using these estimates is usually inconsistent to...

To quantify an operational risk capital charge under Basel II, many banks adopt a Loss Distribution Approach. Under this approach, quantification of the frequency and severity distributions of operational risk involves the bank's internal data, expert opinions and relevant external data. In this...

Many banks adopt the Loss Distribution Approach to quantify the operational risk capital charge under Basel II requirements. It is common practice to estimate the capital charge using the 0.999 quantile of the annual loss distribution, calculated using point estimators of the frequency and...

To quantify the operational risk capital charge under the current regulatory framework for banking supervision, referred to as Basel II, many banks adopt the Loss Distribution Approach. There are many modeling issues that should be resolved to use the approach in practice. In this paper we...

Typically, operational risk losses are reported above some threshold. This paper studies the impact of ignoring data truncation on the 0.999 quantile of the annual loss distribution for operational risk for a broad range of distribution parameters and truncation levels. Loss frequency and...