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Cyclicality in Catastrophic and Operational Risk Measurements

Authors: Allen, Linda
Keywords: operational risk;catastrophic risk;value at risk;extreme value theory;skewed fat tailed distribution
Issue Date: Nov-2003
Series/Report no.: FIN-03-037
Abstract: Using equity returns for financial institutions we estimate both catastrophic and operational risk measures over the period 1973-2001. We find evidence of cyclical components in both the catastrophic and operational risk measures obtained from the Generalized Pareto Distribution and the Skewed Generalized Error Distribution. Our new, comprehensive approach to measuring operational risk shows that approximately two thirds of financial institutions’ returns represents compensation for operational risk.
Appears in Collections:Finance Working Papers

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