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Assessing and managing operational risk with a special emphasis on terrorism risk


Reshetar, Ganna. Assessing and managing operational risk with a special emphasis on terrorism risk. 2008, University of Zurich, Faculty of Economics.

Abstract

The objective of this thesis is to consider different risk
management issues in relation to operational risk with a special emphasis on terrorism risk. Our motivation to implement research in this particularly challenging area of risk management is due to the increasing magnitude of operational losses over the last decade and their negative effect on financial industry. This thesis contributes
to the existing research on operational risk in several ways. First, our research suggests a model that addresses the issue of dependence between operational losses and how it can be accounted for in the value of capital charge for operational risk. Second, we provide a better understanding of the impact of a particular type of operational risk event, specifically of terrorist attacks . As evidenced by the 9/11 attacks, this risk can be catastrophic and can have negative consequences on the behavior of financial markets. We implement empirical analysis of the impact of terrorist attacks on stock, bond and commodity markets and suggest possible diversification strategies of terrorism risk. Finally, we contribute to the area of operational risk transfer, by developing a model for pricing of a multiple-event coupon paying CAT bond. The bond that we consider covers exposure to catastrophic risk such as natural and man-made disasters, including terrorist events.

Abstract

The objective of this thesis is to consider different risk
management issues in relation to operational risk with a special emphasis on terrorism risk. Our motivation to implement research in this particularly challenging area of risk management is due to the increasing magnitude of operational losses over the last decade and their negative effect on financial industry. This thesis contributes
to the existing research on operational risk in several ways. First, our research suggests a model that addresses the issue of dependence between operational losses and how it can be accounted for in the value of capital charge for operational risk. Second, we provide a better understanding of the impact of a particular type of operational risk event, specifically of terrorist attacks . As evidenced by the 9/11 attacks, this risk can be catastrophic and can have negative consequences on the behavior of financial markets. We implement empirical analysis of the impact of terrorist attacks on stock, bond and commodity markets and suggest possible diversification strategies of terrorism risk. Finally, we contribute to the area of operational risk transfer, by developing a model for pricing of a multiple-event coupon paying CAT bond. The bond that we consider covers exposure to catastrophic risk such as natural and man-made disasters, including terrorist events.

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Additional indexing

Item Type:Dissertation
Referees:Chesney Marc, Gibson Rajna
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:April 2008
Deposited On:06 Feb 2009 08:02
Last Modified:26 Jan 2017 08:42
Number of Pages:155
Additional Information:Dissertation for the Faculty of Economics, Business Administration and Information Technology of the University of Zurich

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