The largest US banks 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 use the Loss Distribution Approach (LDA) which defines the aggregate loss distribution as the...

Financial institutions have invested tremendous resources to develop operational risk capital models within the framework of the Advanced Measurement Approach (AMA) of the Basel II Accord. Most of this effort has focused on satisfying evolving regulatory requirements in the near term rather than...

Among operational risk practitioners there is some confusion about the implications of the loss data collection threshold and the estimation of "truncated" or "shifted" distributions. Claims that "shifted" models result in biased parameter estimates rely on the premise that the "true" model is...