The largest US banks and Systemically Important Financial Institutions are required by regulatory mandate to estimate the operational risk capital they must hold using an Advanced Measurement Approach (AMA) as defined by the Basel II/III Accords. Most of these institutions use the Loss...

In operational risk measurement, the estimation of severity distribution parameters is the main driver of capital estimates, yet this remains a non-trivial challenge for many reasons. Maximum likelihood estimation (MLE) does not adequately meet this challenge because of its well-documented...