Operational Risk with Excel and VBA

This is a nice little book, but its content is only tangentially related to what the title suggests. Actually, it is an introduction to basic probability and statistics for non-technical finance professionals. It illustrates concepts with examples from operational risk. Excel and VBA are mentioned but are not a focus. Chapter titles (indicated in the table of contents on the right) suggest the book is more about operational risk than it really is.

 

If you accept it for what it is, the book is quite nice. After a brief discussion of operational risk, it defines random variables. It then introduces the notions of mean, standard deviation, covariance, skewness and kurtosis. It describes basic statistical estimators and hypothesis testing. Next, it introduces a number of standard probability distributions that can be used to model loss severity or frequency of loss. Later chapters touch on more advanced topics, including extreme value theory and Bayesian analysis.

Contents

1. Introduction to operational risk management & modelling

2. Random variables, risk indicators & probability

3. Expectation, covariance, variance & correlation

4. Modeling central tendency & variability of operational risk indicators

5. Measuring skew & fat tails of operational risk indicators

6. Statistical testing of operational risk parameters

7. Severity of loss probability models

8. Frequency of loss probability models

9. Modeling Aggregate Loss distributions

10. The law of significant digits & fraud risk identification

11. Correlation & dependence

12. Linear Regression in Operational Risk Management

13. Logistic regression in operational risk management

14. Mixed dependent variable modelling

15. Validating operational risk proxies using surrogate endpoints

16. Introduction to extreme value theory

17. Managing operational risk with Bayesian belief networks

18. Epilogue

I recommend this book for non-technical managers who work with technical risk management professionals. It will provide you with a more-than-passing intuitive understanding of a variety of technical concepts used in risk management. The fact that the book draws examples from operational risk should not dissuade readers who are more interested in market or credit risk. Most of the basic concepts covered here are equally applicable in those other contexts.
 

 

Ads by Contingency Analysis.

Advertise on this site.
 

disclaimer

website: http://www.contingencyanalysis.com
books direct link: http://www.riskbook.com
copyright © Contingency Analysis, 1996 - current