Connection Parameters of Heavy-tailed Operational Risk Measurement Model and Management Model

Abstract

In order to connect the heavy-tailed operational risk measurement model with management model, a model identifying the crucial supervising parameters of operational risk is built after the heavy-tailed operational VaR's sensitivity is theoretically researched by the elasticity analysis method. Further, the analysis of model application is illustrated with a numerical example. The crucial supervising parameters connect the operational risk measurement model and management model, which make the operational risk management frameworks to be a complete system. And a dynamical supervising system of operational risk is established. This research in theory improves the application of loss distribution approach to the operational risk measurement and management.