Extreme Value Models (EVM)
Extreme Value Models
(EVM) Conference Call
Secretary for call: Bob Guth
Web liaison: Kevin Strobel
The minutes from the May 24 call have been posted to the SOA web site.
There was no new information to report from the Risk Management Section. There was also nothing reported about the web site.
Jonathan Wang (Northern Trust) provided a presentation, "A Practical
Discussion of EVT-Based Modeling of Operational Risk." Jonathan went over
the presentation. It is also available in
Key comments by Jonathan include: Basel II is described on pages 5 and 6. Initially only 10 to 20 U.S. banks are using Basel II, and the remaining 8,000 banks will migrate to Basel II later. Banks are creating their own internally generated risk estimates. The Loss Distribution Approach is on page 9 (frequency distribution x severity distribution ->a simulated loss distribution). The Northern's LDA-EVT Model (v.1.0) is shown as an overview on page 14.
In discussion afterward, we wondered how to choose an appropriate copula. We wanted to discuss copulas and regime-switching models at a future session. (See page 21 of the talk.) Another question was changes in the data as the exposure base changes over time.
We suggested the following questions for the list group:
The next call is scheduled for August 22 at 9AM Central Time.