The Advanced Measurement Approach (AMA) to operational risk capital is vulnerable to gaming, complex, and lacks … comparability. The Standardized Measurement Approach (SMA) to operational risk capital lacks risk sensitivity and is unlikely to be …

This paper proposes an alternative framework to set banks' operational risk capital, which allows for forward … vulnerability to gaming of the AMA and the lack of risk-sensitivity of BCBS's new standardized approach for operational risk …

This paper proposes an alternative framework to set banks’ operational risk capital, which allows for forward … vulnerability to gaming of the AMA and the lack of risk-sensitivity of BCBS’s new standardized approach for operational risk …

requires globally active banks to include operational risk in estimating regulatory and economic capital to be held against … major types of risk. This paper discusses practical issues faced by a bank in designing and implementing an operational risk …

Operational risk is being considered as an important risk component for financial institutions as evinced by the large … sums of capital that are allocated to mitigate this risk. Therefore, risl measurement is of paramount concern for the … purposes of capital allocation, hedging, and new product development for risk mitigation. We perform a comprehensive evaluation …

Choosing a proper external risk measure is of great regulatory importance, as exemplified in the Basel II and Basel III … Accord which use Value-at-Risk (VaR) with scenario analysis as the risk measures for setting capital requirements. We argue a … good external risk measure should be robust with respect to model misspecification and small changes in the data. A new …

conversion on the risk-taking behaviour of the issuing bank. We also test for regulatory arbitrage: do banks try to maintain risk … sample selection bias, we show that CoCo bonds issuance has a strong positive e↵ect on risk-taking behaviour, particularly … amplifies the impact of CoCo bonds on risk-taking. …

excessive risk-taking. The bank's manager can enhance short term profits by either exerting effort or taking on excessive risk …, which increases the bank's exposure to tail risk. Without capital requirements, shareholders induce the manager to undertake … excessive risk when the bank is undercapitalised and the regulator grants forbearance ex-post. The socially optimal regulation …

Under the Basel II regulatory framework non-negligible statistical problems arise when backtesting risk measures. In …. According to Escanciano and Olmo (2010, 2011) these problems persist when incorporating estimation and model risk by adjusting … adequacy of Value at Risk measures. One main finding indicates that backtests of all classes show heavy size distortions. These …

Risk measurement and pricing of financial positions are based on modeling assumptions, which are common assumptions on … model risk by considering a model space. First, we incorporate model risk into market risk measures by introducing model … weighted and superposed market risk measures. Second, we quantify model risk itself and propose axioms for model risk measures …