Operational risk: measurement & modelling

Operational risk is emerging as the third leg of an institutional risk strategy for financial institutions. Now recognised as a potential source of financial waste, operational risk has become the subject of surveys, analysis, and the search for a comprehensive set of definitions and a shared framework. Written by a leading expert on operational risk measurement, this work provides feedback for managing and mitigating it. Using both theoretical and practical material, the author lays out a foundation theory that can be applied and refined for application in the financial sector and beyond which includes a new technique called Delta-EVT™. This technique is a combination of two existing methods which provides for the complete measurement of operational risk loss.

The book contains step-by-step descriptions based on real-world examples, formulæ and procedures for calculating many common risk measures and building causal models using Bayesian networks, and background for understanding the history and motivation for addressing operational risk.