In measuring its Operational Risk VaR, a bank needs to pay attention when including external data in its analysis. Without careful consideration of the specific nature of the bank's risk there can be relevant systemic risk implications as pointed out in Torresetti and Nordio (2014). Based on...

Identifying the Maximum Domain of Attraction (MDA) of a given (severity) distribution in Operational Risk is not an easy task with a significant impact on the Value at Risk (VaR). One could resort to the result of Pickands (1975) and select a suitably high threshold to model the excesses so that...

Real operational loss data exhibit in some cases power laws on a wide part of the tail distributions, with sharp deviations far on the right suggesting they decrease to zero faster at infinity. Taking into account such deviations when modelling operational risk leads to great differences in VaR...

In measuring its Operational Risk VaR, a bank needs to pay attention when including external data in its internal loss collection. In principle, these data should be scaled consistently to the specific nature of the bank's risk, but this is not done by the majority of institutions with advanced...