A Method of Estimating Operational Risk: Loss Distribution Approach with Piecewise-defined Frequency Dependence

In loss distribution approach (LDA), the most popular approach to operational risk aggregation, modeling the dependence across business lines has been recognized, however, the research of separately modeling dependence of high-frequency low-severity and low-frequency high-severity loss events is scarce so far. In this paper, we present an approach to estimate operational risk by modeling frequency dependence for high-frequency low-severity and...