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User Guide: Oracle Financial Services Operational Risk Economic Capital, Release 2.1
BEICF Shape = 1.5
Scale = 0.9 (does not undergo any rescaling) BEICF Scale = 2.1
New Parameter (Re-scaled parameters *BEICF Adjustments)
Shape’ = 3.225
Scale’ = 1.89
External Data is used for Severity modeling only and not for Frequency modeling.
Near miss values are those frequencies of losses which have not occurred but have the tendency of
occurring. Hence, they do not have any severity values attached to it. The use of near miss values
is restricted to frequency modeling and is optional for the modeler. Near miss values are not
considered in severity modeling.
Additionally, if a RG has all losses as near miss, then the RG is excluded from the modeling
process.
Model Execution: Severity Modeling
Severity data is assumed to be independent of frequency data while modeling. The severity
modeling process begins with the scaling of external data to match internal data. OREC
application supports the following 22 distributions for modeling the severity of internal loss data
and duly scaled external loss data:

Burr

Empirical

Exponential

Extreme Value Theory (GPD for tail)

Gamma

Gumbel

Log gamma

Log Logistic

Log Normal

Pareto

Uniform

Weibull

Truncated Burr

Truncated Exponential

Truncated Gamma

Truncated Gumbel

Truncated Log-Gamma

Truncated Log-Logistic

Truncated Log-Normal
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