Operational Risk in Bank Governance and Control: How to Save Capital Requirement through a Risk Transfer Strategy. Evidences from a Simulated Case Study.

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Abstract

Operational risk management in banking has assumed such importance during the last decade. It has become increasingly important to measure, manage, and assess the impact of operational risk in the economics of banking. The purpose of this paper is to demonstrate how an effective operational risk management provides mitigating effects on capital-at-risk in banking. The paper provides evidences that an implementation of an operational risk transfer strategy reduces bank capital requirement. The paper adopts the loss distribution approach, the Monte Carlo simulation, and copula methodologies to estimate the regulatory capital and simulate the operational risk transfer strategy in banking.
Lingua originaleEnglish
pagine (da-a)142-159
Numero di pagine18
RivistaRISK GOVERNANCE & CONTROL: FINANCIAL MARKETS & INSTITUTIONS
Volume5
Stato di pubblicazionePublished - 2015

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Risk transfer
Capital requirements
Operational risk
Governance
Banking
Risk management
Regulatory capital
Loss distribution
Economics
Methodology
Bank capital
Monte Carlo simulation
Copula

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics
  • Strategy and Management

Cita questo

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title = "Operational Risk in Bank Governance and Control: How to Save Capital Requirement through a Risk Transfer Strategy. Evidences from a Simulated Case Study.",
abstract = "Operational risk management in banking has assumed such importance during the last decade. It has become increasingly important to measure, manage, and assess the impact of operational risk in the economics of banking. The purpose of this paper is to demonstrate how an effective operational risk management provides mitigating effects on capital-at-risk in banking. The paper provides evidences that an implementation of an operational risk transfer strategy reduces bank capital requirement. The paper adopts the loss distribution approach, the Monte Carlo simulation, and copula methodologies to estimate the regulatory capital and simulate the operational risk transfer strategy in banking.",
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