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Applied Economics Letters Volume 18, 2011 - Issue 5
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Original Articles

Estimation of economic capital for operational risk in banking industry: a Brazilian case

Helder Ferreira de Mendonça Department of Economics, Fluminense Federal University, Rua Tiradentes, 17, Ingá, Niterói, Rio de Janeiro, CEP, 24210-510, Brazil; National Council for Scientific and Technological Development (CNPq)Correspondence[email protected]
,
Délio José Cordeiro Galvão Department of Economics, Fluminense Federal University, Rua Tiradentes, 17, Ingá, Niterói, Rio de Janeiro, CEP, 24210-510, Brazil; Central Bank of Brazil
&
Renato Falci Villela Loures Department of Economics, Fluminense Federal University, Rua Tiradentes, 17, Ingá, Niterói, Rio de Janeiro, CEP, 24210-510, Brazil; Coordination for the Improvement of Higher Education Personnel (CAPES)
Pages 485-491 | Published online: 04 Dec 2010
 
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Abstract

This article presents an analysis for the estimation of economic capital concerning operational risk in a Brazilian banking industry case making use of Markov chains, Extreme Value Theory (EVT) and Peaks Over Threshold (POT) modelling. The findings denote that some existent methods present consistent results among institutions with similar characteristics of loss data.

Notes

1An analysis concerning the improvement in the Brazilian financial market after adoption of inflation targeting is offered by de Mendonça and Loures (Citation2009).

The views and opinions offered in this article do not necessarily reflect those of the Central Bank of Brazil.

2The tests for the choice of the best distribution are available from the authors on request.

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