2002/04/17 by Reimer Kühn, Reimer Kuehn, Peter Neu · 1 citation
Economics, Econometrics and Finance · Environmental Science · Physics and Astronomy · #Algorithm #Analogy #Business #Capital market #Complex Network Analysis Techniques #Complex Systems and Time Series Analysis #Computer science #Covariance matrix #Econometrics #Economics #Ecosystem dynamics and resilience #Equity (law) #Equity capital #Finance #Operational risk #Physics #Political science #Process (computing) #Risk analysis (engineering) #Risk management #Statistical physics #Systemic risk #cond-mat.dis-nn #cond-mat.stat-mech
paper · pdf · doi:10.1016/s0378-4371(02)01822-8
12 pages, 7 figures, uses RevTeX 4.0, submitted to Phys. Rev. E
arxiv created 2002/04/17 · openalex publication_date 2003/04/25 · arxiv updated 2009/11/30 · openalex created_date 2016/06/24 · openalex updated_date 2026/08/05
A Value-at-Risk based model is proposed to compute the adequate equity capital necessary to cover potential losses due to operational risks, such as human and system process failures, in banking organizations. Exploring the analogy to a lattice gas model from physics, correlations between sequential failures are modeled by as functionally defined, heterogeneous couplings between mutually supportive processes. In contrast to traditional risk models for market and credit risk, where correlations are described by the covariance of Gaussian processes, the dynamics of the model shows collective phenomena such as bursts and avalanches of process failures.