Measurement Of Operational Risk In Commercial Bank Based On Copula-pot Method

By the Basel Banking Committee estimation, the loss caused by operationalrisk has been just below the credit risk. However, theoretical studies and actualapplication of operational risk have been fall behind these respects of credit risk andmarket risk in China. Under this situation, we should strengthen the operational riskdiscrimination and measurement study to set a corresponding model by theoperational risk loss data. According to calculating the specific reserve money foroperational risk by Chinese commercial bank, it can reduce the loss caused byoperational risk to commercial banks. Thus, the study of operational riskidentification and measurement for China commercial banks has theoretical andpractical significance.The paper analyzes commercial banks operational risk from the two aspects ofidentification and measurement. Firstly, the paper applies the Fault Tree Analysismethod and establishes FTA function to identify commercial banks operational riskclearly. Secondly, according to loss events of operational risk which have asignificant impact on commercial banks generally have characteristics of lowfrequency and high risk, the paper uses POT model of extreme value theory toestablish commercial banks operational risk measurement model. Taking intoaccount correlation between all kinds of commercial banks operational risk, thepaper uses Copula function to establish the risks dependent frame and constructs theCopula-POT model to calculate the total VaR in order to save regulatory capital ofcommercial banks. It can effect portfolio risk diversification and enhance theprofitability of banks. Finally, the paper collects data for applicating theidentification and measurement model and proposes policy recommendations toreduce loss of operational risk.