A Review of Methods for Combining Internal and External Data

22 Pages Posted: 9 Jun 2016

See all articles by Giuseppe Galloppo

Giuseppe Galloppo

Università degli studi della Tuscia

Daniele Previati

University of Rome III

Date Written: December 19, 2014

Abstract

In recent years, the occurrence of operational losses in financial institutions has increased the interest of academics and policy makers in operational risk. One of the main problems regarding the economic capital required to cover operational risk is the lack of sufficiently large databases. We present a set of models mixing internal and external data to predict both the severity and the frequency of operational losses. We show that, rather than a one-size-fits-all solution, there are several approaches, each presenting opportunities and limitations in the logical framework. Our findings offer useful insights for enhanced risk practice and prudential supervision.

Keywords: Operational Losses, Internal and External Data

Suggested Citation

Galloppo, Giuseppe and Previati, Daniele, A Review of Methods for Combining Internal and External Data (December 19, 2014). Journal of Operational Risk, Vol. 9, No. 4, 2014, Available at SSRN: https://ssrn.com/abstract=2791632

Giuseppe Galloppo (Contact Author)

Università degli studi della Tuscia ( email )

Viterbo

Daniele Previati

University of Rome III ( email )

Via Ostiense, 159
Rome, RM 00145
Italy

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