Operational risk : a guide to Basel II capital requirements, by Anna S. Chernobai

By Anna S. Chernobai

Whereas operational hazard has lengthy been considered as a trifling a part of "other" risks--outside the area of credits and marketplace risk--it has fast made its strategy to the leading edge of finance. in truth, with implementation of the Basel II Capital Accord already underway, many fiscal professionals--as good as these getting ready to go into this field--must now get to grips with a number of matters on the topic of operational danger modeling and administration.

Written through the skilled staff of Anna Chernobai, Svetlozar Rachev, and Frank Fabozzi, Operational Risk will introduce you to the main strategies linked to this self-discipline. full of in-depth insights, professional suggestion, and leading edge examine, this accomplished consultant not just provides you with an considerable quantity of data concerning operational chance, however it additionally walks you thru a wide range of examples that might solidify your realizing of the problems discussed.

Topics lined include:

  • The major demanding situations that exist in modeling operational risk.
  • The number of techniques used to version operational losses.
  • Value-at-Risk and its function in quantifying and dealing with operational risk.
  • The 3 pillars of the Basel II Capital Accord.
  • And a lot more.

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Additional resources for Operational risk : a guide to Basel II capital requirements, models, and analysis

Sample text

Banks will be granted an extension to the January 2007 deadline and, as of end 2006, they have until January 2008 to comply with Basel II. Additionally, they have a three-year transition period to allow for a smooth adoption of the Capital Accord. The scope of application is mainly holding companies that are the parent entities within a banking group, internationally active banks, and their subsidiaries including securities companies. S. 1): Pillar I: Minimum risk-based capital requirements Pillar II: Supervisory review of an institution’s capital adequacy and internal assessment process Pillar III: Market discipline through public disclosure of various financial and risk indicators PILLAR I: MINIMUM CAPITAL REQUIREMENTS FOR OPERATIONAL RISK In Pillar I, the regulatory capital charge for operational risk is computed separately by every bank.

Alvarez, G. garp. com. BBA/ISDA/RMA (2000), ‘‘Operational Risk Management—The Next Frontier,’’ Journal of Lending and Risk Management, March, pp. 38–44. org. org. org. org. , and Peters, J. (2005), Measuring and Managing Operational Risk in the Financial Sector: An Integrated Framework, Technical report, National Bank of Belgium. , and Mark, R. (2001), Risk Management, McGraw-Hill, New York. Cruz, M. G. (2002), Modeling, Measuring and Hedging Operational Risk, John Wiley & Sons, New York, Chichester.

Internal versus External Operational Losses Operational losses can be internally inflicted or can result from external sources. Internally inflicted sources include most of the losses caused by human, process, and technology failures, such as those due to human errors, internal fraud, unauthorized trading, injuries, business delays due to computer failures or telecommunication problems. External sources include man-made incidents such as external fraud, theft, computer hacking, terrorist activities, and natural disasters such as damage to physical assets due to hurricanes, floods, and fires.

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