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Operational Risk Aggregation Based on Business Line Dependence: A Mutual Information Approach
Joint Authors
Zhu, Xiaoqian
Wang, Wenzhou
Shi, Limeng
Source
Discrete Dynamics in Nature and Society
Issue
Vol. 2016, Issue 2016 (31 Dec. 2016), pp.1-7, 7 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2016-04-19
Country of Publication
Egypt
No. of Pages
7
Main Subjects
Abstract EN
The dependencies between different business lines of banks have serious effects on the accuracy of operational risk estimation.
Furthermore, the dependencies are far more complicated than simple linear correlation.
While Pearson correlation coefficient is constructed based on the hypothesis of a linear association, the mutual information that measures all the information of a random variable contained in another random variable is a powerful alternative.
Based on mutual information, the generalized correlation coefficient which can capture both linear and nonlinear correlation can be derived.
This paper models the correlation between business lines by mutual information and normal copula.
The experiment on a real-world Chinese bank operational risk data set shows that using mutual information to model the dependencies between business lines is more reasonable than linear correlation.
American Psychological Association (APA)
Wang, Wenzhou& Shi, Limeng& Zhu, Xiaoqian. 2016. Operational Risk Aggregation Based on Business Line Dependence: A Mutual Information Approach. Discrete Dynamics in Nature and Society،Vol. 2016, no. 2016, pp.1-7.
https://search.emarefa.net/detail/BIM-1103526
Modern Language Association (MLA)
Wang, Wenzhou…[et al.]. Operational Risk Aggregation Based on Business Line Dependence: A Mutual Information Approach. Discrete Dynamics in Nature and Society No. 2016 (2016), pp.1-7.
https://search.emarefa.net/detail/BIM-1103526
American Medical Association (AMA)
Wang, Wenzhou& Shi, Limeng& Zhu, Xiaoqian. Operational Risk Aggregation Based on Business Line Dependence: A Mutual Information Approach. Discrete Dynamics in Nature and Society. 2016. Vol. 2016, no. 2016, pp.1-7.
https://search.emarefa.net/detail/BIM-1103526
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1103526