Operational Risk Measurement in Commercial Banks from the Joint Perspective of Multivariate Modeling and Theory

Lijuan Gai; Jun Tang

Proceedings of the 3rd International Conference on Mathematical Statistics and Economic Analysis, MSEA 2024, May 24–26, 2024, Jinan, China

Research Article

Operational Risk Measurement in Commercial Banks from the Joint Perspective of Multivariate Modeling and Theory

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@INPROCEEDINGS{10.4108/eai.24-5-2024.2350131,
    author={Lijuan  Gai and Jun  Tang},
    title={Operational Risk Measurement in Commercial Banks from the Joint Perspective of Multivariate Modeling and Theory},
    proceedings={Proceedings of the 3rd International Conference on Mathematical Statistics and Economic Analysis, MSEA 2024, May 24--26, 2024, Jinan, China},
    publisher={EAI},
    proceedings_a={MSEA},
    year={2024},
    month={10},
    keywords={operational risk extreme value theory evt-pair-copula var monte carlo},
    doi={10.4108/eai.24-5-2024.2350131}
}

Lijuan Gai
Jun Tang
Year: 2024
Operational Risk Measurement in Commercial Banks from the Joint Perspective of Multivariate Modeling and Theory
MSEA
EAI
DOI: 10.4108/eai.24-5-2024.2350131

Lijuan Gai¹, Jun Tang¹^,*

1: Inner Mongolia university of science and technology, Baotou 014000, China

*Contact email: tj2001766@sina.com

Abstract

For commercial banks, operational risk has become as important as market and credit risks. By dividing the operational risk units, establishing the EVT loss intensity POT model, determining the optimal thresholds, and constructing the correlation structure of the operational risk units through the EVT-Pair-Copula model, the total VaR of the operational risk units is calculated to be about 3.36% less than that of the traditional EVT-based POT model where the VaR of each operational risk unit is summed up. Commercial banks can use this model to accurately measure operational risk and formulate a compliant risk management system for risk control.

Keywords: operational risk extreme value theory evt-pair-copula var monte carlo

Published: 2024-10-01
Publisher: EAI

: http://dx.doi.org/10.4108/eai.24-5-2024.2350131