| Recently, loss events caused by operational risk surged. Some financialinstitutions and enterprises got bankrupted. At the first sight, people tended to come tothe conclusion that it was financial derivatives that mattered. However, what was inthe kernel of losses was operational risk. This paper aimed at the research of how tomeasure and describe operational risks. Banking industry was taken as an example forresearch. According to thoughts of The New Basel Committee, this paper came upwith a new framework of operational risk management (ORM). This work should be afurther explore of the advanced measure approach.Firstly, concepts of operational risks were quoted to make losses clear. Then, theLoss Distribution Approach (LDA) was introduced here combined with the LossFrequency/Severity Approach to model a single loss class. Additionally, external datawere converted by transition functions to better the computation of internal models.Secondly, a powerful mathematical tool, copula, was used here to measure therelevant structure of different loss classes of operational risks. And a practical casewas selected to illustrate the new framework for ORM.Finally, the current situation of ORM of domestic banking industry wasdiscussed. Furthermore, some policies were developed to cope with these problems. |
