We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption for measuring capital charges in these models

We examine the quantification of operational risk for banks. We adopt a financial economics approach and interpret operational risk management as a means of optimizing the profitability of an institution along its value chain. We start by defining operational risk and then propose a framework to...

In this paper operational risk is considered from a purely business or profitability point of view. We show for quantifiable operational risk that the three basic figures for profitability management - value, costs and risks - can be modelled such that an integrative point of view on...

We present a multi-period mean-variance optimization program which allows for a joint optimization of the balance and off-balance sheet. We first prove a conjecture of Li and Ng (2000), Leippold et al. (2004, 2003) about the equivalence of the original non-separable mean-variance problem and its...

The Basel Committee on Banking Supervision (quot;the Committeequot;) released a consultative document that included a regulatory capital charge for operational risk. The complexity of the object quot;operational riskquot; led from the time of the document's release to vigorous and recurring...

The concept of a treasury for credit risks is introduced by means of the analogy with the ''classic'' case, namely the interest rate risks' one. The ''classic'' treasury hedges interest rate risks of the banking book by oversteering them by means of an off-balance sheet portfolio consisting of...

We present a multi-period mean-variance optimization program which allows for a joint optimization of the balance and off-balance sheet. Our first finding is the proof of a conjecture of Li and Ng (2000), Leippold, Trojani and Vanini (2004, 2003) about the equivalence of the original...

We show that for a production unit of a bank with well-defined workflows operational risk can be unambiguously defined and quantitatively modelled. The results of this modelling exercise are relevant for the implementation of a risk management framework: It turns out, that only a small share of...

The Basel Committee on Banking Supervision (quot;the Committeequot;) released a consultative document that included a regulatory capital charge for operational risk. Since the release of the document, the complexity of the concept of quot;operational riskquot; has led to vigorous and recurring...

Credit limit management is of paramount importance for successful short-term credit-risk management, even more so when the situation in credit and financial markets is tense. We consider a continuous-time model where the credit provider and the credit taker interact within a game-theoretic...