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A Nonparametric Operational Risk Modeling Approach Based on Cornish-Fisher Expansion

Published on Jan 1, 2014in Discrete Dynamics in Nature and Society0.97
· DOI :10.1155/2014/839731
Xiaoqian Zhu7
Estimated H-index: 7
,
Jianping LiXiaolei19
Estimated H-index: 19
+ 5 AuthorsYongjia Xie4
Estimated H-index: 4
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Abstract
It is generally accepted that the choice of severity distribution in loss distribution approach has a significant effect on the operational risk capital estimation. However, the usually used parametric approaches with predefined distribution assumption might be not able to fit the severity distribution accurately. The objective of this paper is to propose a nonparametric operational risk modeling approach based on Cornish-Fisher expansion. In this approach, the samples of severity are generated by Cornish-Fisher expansion and then used in the Monte Carlo simulation to sketch the annual operational loss distribution. In the experiment, the proposed approach is employed to calculate the operational risk capital charge for the overall Chinese banking. The experiment dataset is the most comprehensive operational risk dataset in China as far as we know. The results show that the proposed approach is able to use the information of high order moments and might be more effective and stable than the usually used parametric approach.
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References16
Newest
#1Jianping LiXiaolei (CAS: Chinese Academy of Sciences)H-Index: 19
#2Xiaoqian Zhu (CAS: Chinese Academy of Sciences)H-Index: 7
Last.Yong Shi (CAS: Chinese Academy of Sciences)H-Index: 39
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#1Ariane Chapelle (ULB: Université libre de Bruxelles)H-Index: 10
#2Yves Crama (University of Liège)H-Index: 30
Last.Jean-Philippe Peters (Deloitte)H-Index: 4
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#1Kjersti Aas (Norwegian Computing Center)H-Index: 14
#2Xeni K. Dimakos (Norwegian Computing Center)H-Index: 6
Last.Anders ØksendalH-Index: 1
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Cited By5
Newest
#1Lu Wei (CAS: Chinese Academy of Sciences)H-Index: 2
#2Jianping LiXiaolei (CAS: Chinese Academy of Sciences)H-Index: 19
Last.Xiaoqian Zhu (CAS: Chinese Academy of Sciences)H-Index: 7
view all 3 authors...
#1Yinghui Wang (CAS: Chinese Academy of Sciences)H-Index: 1
#2Guowen Li (CAS: Chinese Academy of Sciences)H-Index: 2
Last.Xiaoqian Zhu (CAS: Chinese Academy of Sciences)H-Index: 7
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#1Chukiat Chaiboonsri (CMU: Chiang Mai University)H-Index: 7
#2Satawat Wannapan (CMU: Chiang Mai University)H-Index: 1
Last.Anuphak Saosaovaphak (CMU: Chiang Mai University)H-Index: 1
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#1Yinghui Wang (CAS: Chinese Academy of Sciences)H-Index: 1
#2Jianping LiXiaolei (CAS: Chinese Academy of Sciences)H-Index: 19
Last.Xiaoqian Zhu (CAS: Chinese Academy of Sciences)H-Index: 7
view all 3 authors...
View next paperRobust Estimation of Value-at-Risk through Distribution-Free and Parametric Approaches Using the Joint Severity and Frequency Model: Applications in Financial, Actuarial, and Natural Calamities Domains