What is it about?
Building on the theoretical foundation of probability theory and existing concepts in the world of risk calculation, risk mitigation and management, Franzetti describes an integrated framework to quantify operational risk capital and provide a risk mitigation management plan. The model which uses the loss distribution approach is intended to fulfill all requirements of the Basel accord.
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Why is it important?
Franzetti’s book is a remarkable book from an author with long experience in the financial industry and a strong mathematical background. This book can serve as a textbook for advanced graduate seminars on risk management, seminars offered to middle-managers in banks or the basis for an executive MBA course on risk modeling. To reap maximum benefit from this book, readers should have the knowledge corresponding to undergraduate level courses of linear algebra, probability theory and statistical analysis.
Perspectives
Franzetti attempted to create a self-contained book. Filling the void on every mathematical aspect is quite a challenging task. The issue of depth versus breadth is debatable here. Franzetti seems to have chosen breadth at the expense of depth. One can argue that a better approach would have been to decide what concepts the author wants the reader to know or assume that the reader of this book has the prerequisite mathematical knowledge and acknowledging that there are many other issues one could explore. This would have allowed him to present the model building process in more depth to ease its implementation by practitioners.
Dr Zeinab H. Amin
American University in Cairo
Read the Original
This page is a summary of: Operational Risk Modelling and Management, by ClaudioFranzetti, 2011, Boca Raton, FL: Chapman & Hall/CRC Press, 389 pp. ISBN: 978-1-4398-4476-2., Journal of Risk & Insurance, November 2014, Wiley,
DOI: 10.1111/jori.12073.
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