Analytical models of operational risk and new results on the correlation problem

TL;DR

This paper introduces analytical models for operational risk assessment, demonstrating that assuming uniform correlation is a reliable approach for calculating capital requirements.

Contribution

It presents a portfolio-based analytical framework for operational risk and establishes the robustness of uniform correlation assumptions.

Findings

Uniform correlation is a robust assumption for capital measurement.

New analytical results on the correlation problem in operational risk.

Framework enhances understanding of risk dependencies.

Abstract

We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption for measuring capital charges in these models.