Study on Operational Risk Measurement of Commercial Bank Based on Extreme Value Theory

According to the fact that characteristics of operational risk loss distribution are difficult to describe,Extreme Value Theory(EVT) is applied to measure operational risk for commercial banks in a statistical and probabilistic way.In detail,the way to assess the frequency distribution and severity distribution is developed under the peak over threshold(POT) method.Result reveals that;firstly,EVT is more flexible and feasible to measure operational risk by using the real loss data.Secondly,EVT only focus on the tail of loss data rather than the whole distribution,so there is no need to hypothesize the possible loss distributions in advance and the model risks from improper model selection are avoided;Thirdly,GDP distribution under POT method fits operational risk loss data very well,it captures the "fat-tail" feature and avoids the disadvantages of underestimate risk.