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Modeling the dependence between extreme operational losses and economic factors: a conditional semi-parametric Generalized Pareto approach
Hambuckers, julien; Heuchenne, Cédric; Lopez, Olivier
201513th International Paris Finance Meeting 2015
Peer reviewed
 

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Keywords :
operational loss; semiparametric; single-index; conditional generalized Pareto distribution; GPD
Abstract :
[en] In this paper, we model the severity distribution of operational losses data, condi- tional on some covariates. Indeed, previous studies [Chernobai et al., 2011, Cope et al., 2012, Chavez-Demoulin et al., 2014a] suggest that this distribution might be in uenced by macroeconomic and rm-speci c factors. We introduce a conditional Generalized Pareto model, where the shape parameter is an unknown function of a linear combina- tion of the covariates. More precisely, we rely on a single-index assumption to perform a dimension reduction that enables to use univariate nonparametric techniques. Hence, we su er neither from too strong parametric assumption nor from the curse of dimen- sionality. Then, we develop an iterative approach to estimate this model, based on the maximisation of a semiparametric likelihood function. Finally, we apply this method- ology on a novel database provided by the bank UniCredit. We use rm-speci c factors to estimate the conditional shape parameter of the severity distribution. Our analysis suggests that the leverage ratio of the company, the proportion of the revenue coming from fees as well as the risk category have an important impact on the tail thickness of this distribution and thus on the probability of su ering from large operational losses.
Research center :
UER Opération (HEC-ULiège)
Disciplines :
Quantitative methods in economics & management
Author, co-author :
Hambuckers, julien ;  Université de Liège > HEC-Ecole de gestion : UER > Statistique appliquée à la gestion et à l'économie
Heuchenne, Cédric ;  Université de Liège > HEC-Ecole de gestion : UER > Statistique appliquée à la gestion et à l'économie
Lopez, Olivier
Language :
English
Title :
Modeling the dependence between extreme operational losses and economic factors: a conditional semi-parametric Generalized Pareto approach
Publication date :
December 2015
Event name :
13th International Paris Finance Meeting 2015
Event organizer :
Association Française de Finance (AFFI)
Banque de France
Event place :
Paris, France
Event date :
du 17 décembre 2015 au 18 décembre 2015
Audience :
International
Peer reviewed :
Peer reviewed
Funders :
F.R.S.-FNRS - Fonds de la Recherche Scientifique [BE]
Available on ORBi :
since 09 September 2015

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