Description

This course introduces the general methodology for operational risk management. Special emphasis will be placed on the analytical and modeling techniques for operational risk. Contents include Basel regulations, loss models, extreme value theory, copula, operational value-at-risk and operational risk derivatives. Machine learning techniques for managing operational risk will also be explored. The use of statistical packages R will be demonstrated.

Learning outcomes

Upon finishing the course, students are expected to

1. understand the Basel regulations on operational risk;

2. build statistical models for operational risk;

3. understand extreme value theory and copula models;

4. calculate operational value-at-risk and price operational risk derivatives;

5. use statistical software to conduct machine learning algorithms and statistical inference for operation risk models.