Abstract: The centre of market, credit and insurance risk is the financial contract. Knowing the financial contracts and the states and fluctuations of the risk factors is sufficient to know the risk. The split between the “operational” and the “risk” part of operational risk is based on a cost–benefit model. Financial institutions measure their exposure to operational risks by identifying their potential or actual losses and by monitoring the source of these losses. While loss in the context of market and credit risk is clear it has to be elaborated within the context of operational risk. Operational risk losses can also be simulated based on what–if scenarios, which is useful when evaluating high-severity events. The definition of these scenarios could be based on past cases, but historical losses may not be enough to give realistic assumptions for the bank's future exposure to operational losses.
Publication Year: 2012
Publication Date: 2012-01-02
Language: en
Type: other
Indexed In: ['crossref']
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