Operational Risk

Posts: 1
Joined: Thu Jan 08, 2015 9:23 pm

Operational Risk

Postby aggarwal.karan13 » Thu Jan 08, 2015 9:24 pm

Sir , when we do copulas, we find out the joint probabilities of say loss frequency 1 and loss frequency 2, my doubt is what is the use of computing these probabilities, for Loss aggregation we have correlated frequencies and loss aggregation , so what is the need of calculating the joint probabilities ??

Is it to see how model is capturing dependance


Do we throw random numbers in the joint distribution and get joint frequencies from there


Do the distribution from where VaR will be based on same joint probabilities you are getting

Or any other reason.

Secondly sir in Min copula we say min (u,v) , by doing this do we get joint probabilities only ? and if yes once again what is use of that joint prob when we are directly getting loss frequencies by fitting u and v in appropriate distribution.

Finance Junkie
Posts: 947
Joined: Wed Apr 09, 2014 6:28 am

Operational Risk

Postby edupristine » Wed Feb 11, 2015 5:27 am

Copulas are modelled using joint probability distribution to capture the dependence of both variables simultaneously.
Moreover copulas are an alternative to correlation where an explicit dependence cannot be extracted using correlation coefficient.
Random number generation is typically used for joint prob modelling.
Var will also be based on the same joint distribution.

Return to “Operational Risk”



Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to abuse@edupristine.com and we will rectify it.