At large financial institutions, operational risk is gaining the same importance as market and credit risk in the capital calculation. Although scenario analysis is an important tool for financial risk measurement, its use in the measurement of operational risk capital has been arbitrary and...

Since I circulated a working paper (coauthored with Kabir Dutta) entitled “Scenario Analysis in the Measurement of Operational Risk Capital: A Change of Measure Approach” on the Wharton Financials Institutions Center website in March of 2010, many different questions have been received...