Aniruddho Sanyal, Wolters Kluwer
In order to apply the advanced measure approach (AMA), it is necessary to bring together a number of components. The regulatory guidance from Basel names these components—such as internal data, external data, BEICF, and scenario analysis—but stops short of providing detailed guidance on how to use them together to get to an operational value at risk that is inclusive of all these inputs. A key factor in gaining approval from the regulator to use AMA calculations is getting approval for the calculation methodology. Wolters Kluwer Financial Services (WKFS) recommends combining internal loss data and scenario analysis to arrive at an AMA capital measure as described by the Dutta-Babbel Change of Measure (COM) approach. It is, in fact, a robust way to apply the loss distribution approach (LDA).
The WKFS of implementation of the Dutta-Babbel COM model directly deals with problem that some lines of business (LOBs) or event types especially for newly acquired subsidiaries may have data-scarcity-related challenges. WKFS has preconfigured their system to use to use the Dutta-Babbel COM approach to calculation, including a proprietary .xla add-in that invokes the use of the MATLAB Runtime. This presentation also looks into MATLAB Compiler™ as a powerful development tools.