Based On Extreme Value Theory, China's Commercial Banks Operational Risk Measurement And Management Studies

As the development of the world's economy and banks expanding, many operational risks existing in commercial banks in and out of China. In recent years, both "the New Basel Capital Accord" and the China Banking Regulatory Commission attach much importance to operational risk management. The problem of making standardized measurements for banks' operational risk is very important and urgent to both the managers and researchers. This paper, based on the Extreme Value Theory (EVT), studies the way to measure and manage banks' operational risk.Based on the Extreme Value Theory (EVT), this paper put forward a model called Peaks-Over-Threshold Model for Operational-Risk-Loss. As threshold is very important in this model, we propose a way which unifies several simple methods to choose an accurate threshold. We collect the operational loss data of Chinese commercial banks from newspaper, internet and other published media. This data includs 715 operational risk events (510 of them with precise loss amount). According to this data, we make a statistical analysis about the operational risk loss and then put them into the Peaks-Over-threshold Model of Operational-Risk-Loss, we finally get the value-at-risk of the Chinese commercial banks' operational risk. Besides this, we analyze the present situation of banks' operational risk and figure out the problems of operational risk management in China. In the end, based on the analysis and studies, we give some suggestions about how to improve the operational risk management of Chinese commercial banks.