Research seminar in Finance by Dean Fantazzini (MSE and HSE): "The effects of misspecified frequency, severity and dependence function modeling on operational risk measures"
Thursday, March 18 at 4.30 pm ICEF held Research seminar in Finance.
Presenter: Dean Fantazzini (MSE and HSE)
Topic: "The effects of misspecified frequency, severity and dependence function modeling on operational risk measures"
Abstract: "The quantitative analysis of Operational Risk is a relative recent field of study within the more general quantitative risk management framework. However, little attention has been place to study the effect on the computation of the operational risk measures when the frequency models, the severity models and the dependence structures are misspecified. Besides, few studies have analyzed the behaviour of these models in small samples. In this work we present and discuss the results of a large-scale Monte Carlo study of different misspecified models in an Operational Risk setting. We show that the misspecification in the marginal frequency and severity distributions more than offset the biases in copula parameters when computing risk measures and small samples are considered, which is the usual case for operational risk. Interestingly, we find that Extreme Value Theory (EVT) works fine only with medium to large datasets, while it delivers poor results when dealing with small samples".
Venue: Pokrovsky Boulevard 11, Room Zh-822