Operational Risk. Measurement and Modelling. The Wiley Finance Series

  • ID: 2220442
  • Book
  • 276 Pages
  • John Wiley and Sons Ltd
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In this groundbreaking working, Jack L. King, Ph.D. provides the basis for an in–depth understanding of operational risk by focusing on its measurement and modelling. Using both theoretical and practical material, he lays out a foundation theory that can be applied and refined for application in the financial sector and beyond.

Operational Risk: Measurement and Modelling is a comprehensive source for understanding the effects of risk inherent in all operations. This book:

∗ Provides a set of assumptions, definitions, and methodology for quantifying operational risk

∗ Uses comprehensive step–by–step descriptions based on real–world examples to demonstrate the application and reinforce key ideas..

∗ Introduces Delta–EVTTM(TM), a new technique that allows firms to deal with losses resulting from routine errors, control breakdowns, and rare events.

∗ Relies on causality as the key for identifying operational risk that can be controlled and provides a basis for management action.

∗ Explains clearly the relation between the risk assessment, process engineering, and statistical loss models.

∗ Includes and explains in detail the formulas and procedures for calculating many common risk measures and building causal models using Bayesian networks.

"Dr King introduces practical solutions to a subject that is in danger of being drowned in theory."

– Philip Martin, Managing Director, HSBC Operational Risk Consultancy

"Jack King draws together a number of theoretical approaches to present, in a comprehensive yet straightforward manner, a systematic framework that supports the measurement and modelling of operational risk. As such, this book should prove thought provoking and act as an invaluable reference for both practioners and students of the subject alike. A welcome addition to the debate."

– Tim Kent–Phillips, Executive Director, Operations, Lehman Brothers International Europe Ltd.

"Dr King′s work shows clearly his first–hand experience in the financial sector and should enable practitioners to do a superb job of building an operational risk measurement system. The in–depth understanding you need to set things up from scratch is contained in this book."

– Dr Gabor Laszlo, vice President, Market Risk Management, J.P. Morgan Chase and Co

"I believe this book makes a very valuable contribution to the ongoing discussion about how operational risk shuld be addressed. Practitioners, regulators and academics will discover useful elements to enhance their conceptual understanding of operational risk, from a perspective of measurement, control and management, as well as how it is linked to the calculation of economic capital requirements."

– Dr Daniel Egloff, Arthur Andersen
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Preface.

Acknowledgements.

INTRODUCTION TO OPERATIONAL RISK.

Introduction to Operational Risk.

Historical Losses.

Regulation.

MEASURING OPERATIONAL RISK.

A Measurement Framework for Operational Risk.

The Delta Methodology.

The EVT Methodology.

MODELLING OPERATIONAL RISK.

Delta–EVT(TM) Models for Operational Risk.

Causal Modelling.

Causal Models for Operational Risk.

MATHEMATICAL FOUNDATIONS.

Error Propagation.

Extreme Value Theory.

Bayesian Methods.

APPENDICES.

Glossary.

Bibliography.

Index.
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Jack L. King
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