CRA Insights

A Note on Scenario Analysis in the Measurement of Operational Risk Capital: A Change of Measure Approach

September 24, 2010

In this note, David Babbel addresses reader questions concerning the methodology used in a prior paper, “Scenario Analysis in  the Measurement of Operational Risk Capital: A Change of Measure Approach.” The main objectives of the note are to explain the justification of the method introduced, explain why the author thinks that the method is based on the Change of Measure approach, and explain how the method suggested in the study uses and filters the scenarios properly. To read the paper, click the link below.