Figure

DOI:

https://doi.org/10.14483/23448393.18575

Publicado:

2022-01-04

Número:

Vol. 27 Núm. 1 (2022): Enero-Abril

Sección:

Sección Especial: Mejores artículos extendidos - WEA 2021

Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model

Autores/as

  • Betty Johanna Garzon-Rozo University of Edinburgh
  • Claudia Paola Martín Bernal Banco de la República de Colombia
  • Feizar Javier Rueda Velasco Universidad Distrital Francisco José de Caldas https://orcid.org/0000-0002-0109-9204

Palabras clave:

operational risk, Loss Distribution Approach (LDA), multivariate copulas, emerging markets (en).

Palabras clave:

riesgo operativo, Modelo de Distribución de Pérdidas Agregadas (LDA), cópulas multivariadas, mercados emergentes (es).

Resumen (en)

Context: Advanced Measurement Approach (AMA) has been the umbrella to identify the models used for modeling the capital to cover Operational Risk (Total Operational Value at Risk, OpVaR) in financial institutions in developed countries. The Loss Distribution Approach (LDA) has been the most popular model used by international banks for OpVaR calculation. However, the operational losses frequently have multivariate dependences that are not accounted for in the LDA. This paper applies a Gaussian copula to model the multivariate dependences in operational losses.

Method: Two models were compared to estimate capital requirement for operational risk. Model (i) is the standard LDA model (BCBS 2004). Model (ii) incorporates a multivariate Gaussian copula into the LDA to model multivariate dependence between operational losses (severities). This research analyzes an operational loss data set, SAS® Operational Risk Global Data (SAS OpRisk Global Data), in order to model operational risk at financial institutions in emerging markets between 1990 and 2013.

Results: The impact of Model (ii) was evaluated on the estimates of the total regulatory capital for operational risk and compared with the one predicted by (i). The results confirm the existence of diversification benefit up to 33%.

Conclusions: Modeling explicitly the multivariate dependence between operational losses has a clear impact on capital requirement for institutions in emerging markets. The implementation of a Gaussian copula into the LDA model provides a sophisticated tool to estimate operational risk capital in emerging markets, as well as the possibility for diversification benefit.

Acknowledgements: To SAS for providing the database used in this research.

Resumen (es)

Contexto: Bajo el Enfoque de Medición Avanzad (AMA) se han identificado los modelos utilizados para modelar el capital necesario para cubrir el Riesgo Operacional (Valor Operacional Total del Riesgo, OpVaR) en instituciones financieras de países desarrollados. El Enfoque de Distribución de Pérdida (LDA) ha sido el modelo más popular usado por bancos internacionales para calcular el OpVaR. Sin embargo, las pérdidas operacionales suelen tener dependencias multivariadas que no son tenidas en cuenta en el LDA. Este artículo aplica una copula Gaussiana para modelar las dependencias multivariadas en pérdidas operacionales.

Método: Se compararon dos modelos para estimar el requerimiento de capital para el riesgo operacional. El Modelo (i) es el modelo estándar LDA (BCBS 2004). El Modelo (ii) incorpora una copula Gaussiana al LDA para modelar la dependencia multivariada entre pérdidas operacionales (severidades). Para modelar el riesgo operacional en instituciones financieras de mercados emergentes se emplearon datos reales de perdidas operacionales  entre 1990 y 2013 provistas por SAS® Operational Risk Global Data (SAS OpRisk Global Data).

Resultados: El impacto del Modelo (ii) se evaluó con respecto a los estimados del capital total regulatorio para el riesgo operacional y se comparó con el predicho por (i). Los resultados confirman la existencia de un beneficio de diversificación de hasta 33 %.

Conclusiones: Modelar explícitamente la dependencia multivariada entre pérdidas operacionales tiene un claro impacto sobre el requerimiento de capital para instituciones financieras en mercados emergentes. La implementación de la cópula Gaussiana en el modelo LDA provee una herramienta sofisticada para estimar el capital de riesgo operacional en mercados emergentes, así como la posibilidad de obtener  beneficio por diversificación.

Agradecimientos: A SAS® por proporcionar la base de datos con la que se realizó este estudio.

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Cómo citar

APA

Garzon-Rozo, B. J., Martín Bernal, C. P., & Rueda Velasco, F. J. (2022). Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model. Ingeniería, 27(1). https://doi.org/10.14483/23448393.18575

ACM

[1]
Garzon-Rozo, B.J., Martín Bernal, C.P. y Rueda Velasco, F.J. 2022. Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model. Ingeniería. 27, 1 (ene. 2022). DOI:https://doi.org/10.14483/23448393.18575.

ACS

(1)
Garzon-Rozo, B. J.; Martín Bernal, C. P.; Rueda Velasco, F. J. Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model. Ing. 2022, 27.

ABNT

GARZON-ROZO, B. J.; MARTÍN BERNAL, C. P.; RUEDA VELASCO, F. J. Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model. Ingeniería, [S. l.], v. 27, n. 1, 2022. DOI: 10.14483/23448393.18575. Disponível em: https://revistas.udistrital.edu.co/index.php/reving/article/view/18575. Acesso em: 22 ene. 2022.

Chicago

Garzon-Rozo, Betty Johanna, Claudia Paola Martín Bernal, y Feizar Javier Rueda Velasco. 2022. «Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model». Ingeniería 27 (1). https://doi.org/10.14483/23448393.18575.

Harvard

Garzon-Rozo, B. J., Martín Bernal, C. P. y Rueda Velasco, F. J. (2022) «Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model», Ingeniería, 27(1). doi: 10.14483/23448393.18575.

IEEE

[1]
B. J. Garzon-Rozo, C. P. Martín Bernal, y F. J. Rueda Velasco, «Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model», Ing., vol. 27, n.º 1, ene. 2022.

MLA

Garzon-Rozo, B. J., C. P. Martín Bernal, y F. J. Rueda Velasco. «Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model». Ingeniería, vol. 27, n.º 1, enero de 2022, doi:10.14483/23448393.18575.

Turabian

Garzon-Rozo, Betty Johanna, Claudia Paola Martín Bernal, y Feizar Javier Rueda Velasco. «Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model». Ingeniería 27, no. 1 (enero 4, 2022). Accedido enero 22, 2022. https://revistas.udistrital.edu.co/index.php/reving/article/view/18575.

Vancouver

1.
Garzon-Rozo BJ, Martín Bernal CP, Rueda Velasco FJ. Capital Requirements to Cover Operational Risk in Financial Institutions of Emerging Markets. A Gaussian Copula Model. Ing. [Internet]. 4 de enero de 2022 [citado 22 de enero de 2022];27(1). Disponible en: https://revistas.udistrital.edu.co/index.php/reving/article/view/18575

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