Thoughts About Revising Loss Distribution Approach Of Commercial Bank's Operational Risk

Operational risk econometric model has become the main topic being studied bythe bank industry. The Basic Indicator Approach(BIA), The StandardizedApproach(SA), Internal Measurement Approach(IMA), Loss DistributionApproach(LDA), Extreme Value Theory(EVT), Scorecard Cards Approaches(SCA) asa method of risk measurement models can be operated to provide a operational riskmanagement of commercial banks. In summing up the discussion of the advantagesand disadvantages existing in the measurement methods on the basis of hypothesesanalysis, covering the risk area, with the integration of the market risk, credit riskcontrols and economic capital of commercial banks, LDA model is the best options ofall the model by which commercial banks can control the minimum level of risk leveland economic capital;And the LDA model in the analysis of a succession process based on theiradherence to realistic operational risk from the frequency of the loss distribution, theseverity of the loss distribution, the risk profile index of the LDA models to exploredifferent applications to be operated in real analysis, pointing out the method of theaccumulation and integration of internal and external historical data, a seriousbottleneck for the LDA model, and to form a more complete LDA model in the last;Through the adoption of the losses models comparing maps and comparative analysisof assumptions and focuses of the LDA model and the EVA model, the final lossdistribution model in theory that covers the most complete loss area, is theamendments LDA model with the EVA model that will be the ultimate model tocontrol operational risk, and meanwhile pointing out the LDA model parametersfactors interval. With all the conditions to perfect, the LDA model will become oneof the important ways to help control the economic capital of commercial banks.