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Functional Correlation Approach to Operational Risk in Banking Organizations
Company: Physica A
Company Url: Click here to open
Year Of Publication: 2003
Month Of Publication: April
Pages: 650-666
Download Count: 1915
View Count: 9731
Comment Num: 0
Language: EN
Who Can Read: Free
Date: 10-4-2002
Publisher: Administrator
A Value-at-Risk based model is proposed to compute the adequate equity capital necessary to cover potential losses due to operational risks, such as human and system process failures, in banking organizations. Exploring the analogy to a lattice gas model from physics, correlations between sequential failures are modeled by as functionally de ned, heterogeneous couplings between mutually supportive processes. In contrast to traditional risk models for market and credit risk, where correlations are described by the covariance of Gaussian processes, the dynamics of the model shows collective phenomena such as bursts and avalanches of process failures.
Kuhn, Reimer Sign in to follow this author
Neu, Peter Sign in to follow this author
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