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Journal articles (2012), Journal of Operational Risk, 7 (4), pp. 3-23

Modeling Macroeconomic Effects and Expert Judgements in Operational Risk: A Bayesian Approach

CAPA SANTOS H., KRATZ Marie , MOSQUERA MUNOZ F.

We present in this paper a contribution on operational risk modeling. We consider a general Bayesian context incorporating information on market risk profile, experts opinion and operational losses, taking into account the general macroeconomic environment as well. This modeling aims at estimating a characteristic parameter of the operational risk severity distribution function, using those sources of information. It generalizes under more realistic conditions a study realized by Lambrigger, Shevchenko and Wüthrich, and analyses the influence of macroeconomic effects on operational risk. Our theoretical model suggests that severities of operational losses are more related to the macroeconomic environment than usually assumed. Link to the article

CAPA SANTOS, H., KRATZ, M. and MOSQUERA MUNOZ, F. (2012). Modeling Macroeconomic Effects and Expert Judgements in Operational Risk: A Bayesian Approach. Journal of Operational Risk, 7(4), pp. 3-23.

Keywords : #Quantitative-risk-management, #Solvency-2, #Basel-II, #Bayesian-inference, #Operational-risk, #Macroeconomics-dependence, #Loss-distribution-approach