Operational risk quantification for loss frequency using fuzzy simulation
Shuxia Liu1, Haijie Mi2
COMPUTER MODELLING & NEW TECHNOLOGIES 2014 18(12C) 577-581
1School of Business Administration, Hebei Normal University of Science & Technology, Qinhuangdao, China
2Chinese Unicom Shijiazhuang branch, Shijiazhuang, China
The estimation of the frequency parameter of operational risk quantification has received increased attention under the new Basel proposal. This paper proposes an advanced measurement approach using fuzzy point estimation. In this approach, prior membership function could be obtained through fuzzy maximum entropy rule. When operational risk loss data is given, posterior membership function can be easily calculated by using fuzzy point theorem. After posterior mean is exploited as fuzzy point estimate, loss frequency distribution is gotten. Finally, an empirical analysis on this model is conducted based historical data obtained from a Chinese commercial bank. The result shows that economical can reduce the complexity and communication cost.