Economy – Quantitative Finance – Risk Management
Scientific paper
2009-06-22
Physica A 389 (2010), pp. 1721-1728
Economy
Quantitative Finance
Risk Management
Scientific paper
10.1016/j.physa.2009.12.043
A system for Operational Risk management based on the computational paradigm of Bayesian Networks is presented. The algorithm allows the construction of a Bayesian Network targeted for each bank using only internal loss data, and takes into account in a simple and realistic way the correlations among different processes of the bank. The internal losses are averaged over a variable time horizon, so that the correlations at different times are removed, while the correlations at the same time are kept: the averaged losses are thus suitable to perform the learning of the network topology and parameters. The algorithm has been validated on synthetic time series. It should be stressed that the practical implementation of the proposed algorithm has a small impact on the organizational structure of a bank and requires an investment in human resources limited to the computational area.
Aquaro V.
Bardoscia Marco
Bellotti Roberto
Carlo F. de
Consiglio A.
No associations
LandOfFree
A Bayesian Networks Approach to Operational Risk does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.
If you have personal experience with A Bayesian Networks Approach to Operational Risk, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and A Bayesian Networks Approach to Operational Risk will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-495282