Operational Risk [20]

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Bullet points include: Endogenous parameters: Likelihood that individual commits fraud = f, Likelihood (conditional on not committing fraud) that individual monitors = m, F = (utility) gain of fraud, C = (utility) cost of being caught or being associated with fraud, G = (utility) gain of detecting fraud, M = (utility) cost of monitoring, We want to find Pf = prob of committing undetected fraud and Pm = prob that individual will uncover fraud. Probabilities of occurrence and Utility that individual gains

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