Purpose: In machine learning applications, and in credit risk modeling in particular, model performance is usually measured by using cumulative accuracy profile (CAP) and receiving operating characteristic curves. The purpose of this paper is to use the statistics of the CAP curve to provide a...

We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption for measuring capital charges in these models.

Internal models of operational risk are all built based on the same guidelines provided by the regulators. However, we observe a broad range of practices among banks concerning modeling choices and calibration methods. It is thus relevant to discuss the relative importance of the main drivers...

Most of the banks' operational risk internal models are based on loss pooling in risk and business line categories. The parameters and outputs of operational risk models are sensitive to the pooling of the data and the choice of the risk classification. In a simple model, we establish the link...

Athletes are aware that the outcome of a sport competition is uncertain. First, the opponents they face are sampled more or less at random, depending on how the elimination draw is designed. Second, the results of individual contests are themselves subject to the laws of probability.Top athletes...

The risk of securitization exposures comes from credit risk on the underlying pool of assets or collateral. Peeks in credit risk may lead to high losses for equity and mezzanine tranches, and may lead to some losses on senior tranches as well. Additionally to credit losses, commingling risk or...

Most of the banks' operational risk internal models are based on loss pooling in risk and business line categories. The parameters and outputs of operational risk models are sensitive to the pooling of the data and the choice of the risk classification. In a simple model, we establish the link...