A central limit theorem formulation for empirical bootstrap value-at-risk

Abstract

In this paper, the importance of the empirical bootstrap (EB) in assessing minimal operational risk capital is discussed, and an alternative way of estimating minimal operational risk capital using a central limit theorem (CLT) formulation is presented. The results compare favorably with risk capital obtained by fitting appropriate distributions to the same data. The CLT formulation is significant in validation because it provides an alternative approach to the calculation that is independent of both the empirical severity distribution and any dependent fitted distribution.

A Framework for Analysis and Prediction of Operational Risk Stress

“…We attempt to predict the future lossesx t using time series derived from historic data. In [33], we found that predicting 3 months into the future was sufficiently accurate in most cases. Therefore, suppose that n quarters t 1 , t 2 , ..., t n are available and that "windows" of r consecutive quarters are taken.…”

Estimation of value-at-risk for conduct risk losses using pseudo-marginal Markov chain Monte Carlo

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