Business, Management and Accounting
2 years ago

New calculation technique revolutionizes bank capital management for operational risk!

South African Journal of Economic and Management Sciences
Calculating operational value-at-risk (OpVaR) in a retail bank
Ja’nel Esterhuysen, Paul Styger, Gary Wayne Van Vuuren

Paper Summary

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The article discusses how banks calculate operational value-at-risk (OpVaR) to manage risks. It introduces a new method for calculating OpVaR and explains how it affects the capital banks need for operational risks. The article shows that using the Advanced Measurement Approach (AMA) helps banks align economic and regulatory capital, while the Standardised Approach (SA) does not. This means that OpVaR models can help banks better estimate the capital needed to cover potential losses.