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 Financial Institutions Center website in March of 2010, many different questions have been received concerning...

Operational risk is now increasingly being considered an important financial risk and has been gaining importance similar to market and credit risk. In particular, in the banking regulation for large financial institutions it is required that operational risk be separately measured. The capital...

Basis risk is the risk attributable to uncertain movements in the spread between yields associated with a particular financial instrument or class of instruments, and a reference interest rate over time. There are seven types of basis risk: Yields on 1) Long-term versus short-term financial...

Reinsurance is a mechanism the insurance industry uses to spread the risk it assumes from policyholders. Through reinsurance, the industry's losses are absorbed and distributed among a group of companies so that no single company is overburdened with the financial responsibility of offering...

type="main" xml:lang="en" <title type="main">Abstract</title> <p>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...</p>

Return distributions in general and interest rates in particular have been observed to exhibit skewness and kurtosis that cannot be explained by the (log)normal distribution. Using g-and-h distribution we derived a closed-form option pricing formula for pricing European options. We measured its...