Operational risk management remains a major concern for financial institutions. Indeed, institutions are bound to manage their own funds to hedge this risk. In this paper, we propose an approach to allocate one's own funds based on a combination of historical data and expert opinion using the...

We propose independence and conditional coverage tests which are aimed at evaluating the accuracy of Value-at-Risk (VaR) forecasts from the same model at different confidence levels. The proposed procedures are multilevel tests, i.e., joint tests of several quantiles corresponding to different...

We explore the Monte Carlo steps required to reduce the sampling error of the estimated 99.9% quantile within an acceptable threshold. Our research is of primary interest to practitioners working in the area of operational risk measurement, where the annual loss distribution cannot be...