Nieadekwatność Rekomendacji M do instrumentów bazowych dla pochodnych ryzyka operacyjnego
Inadequacy of Recommendation M to Underlying Instruments for Operational Risk Derivatives

Summary/Abstract: This article describes the development of a new class of derivatives - operational risk derivatives (ORD). Currently, this class does not exist and only two groups of derivatives traded on the market (catastrophe and weather derivatives) could be classified as the ORD. This class of derivatives applies to hedge against any operational risk factor. The development of the concept will require extensive involvement of many financial market participants. Implementation of this idea is only a matter of time, because the need for hedging against operational risks is growing ever faster and currently many of the risk factors cannot be hedged. The paper aims to analyze the adequacy of the M Recommendation (on operational risk management in banks) to the requirements of base instruments for the ORD, and to propose a methodology regarding the classification and definitions of operational events, which could become the base instruments for operational risk derivatives. The approach, in particular, assumes analogy between the construction and use of credit derivatives and operational risk derivatives. It points to the need to prepare, in the field of operational risk, a document similar to ”Recommendations on the closing credit futures on the Polish interbank market, operating in the area of credit risk”. Implementation of such solution may accelerate the development of this new class of operational risk derivatives. The achieved results are innovative ideas and concepts such as: * the possibility of using the M Recommendation of Polish banking supervision mentioned above, * the idea for a new group of derivatives of operational risk (ORD based on event operational risk), * the idea to develop a document for operational risks similar to “Recommendations on the closing credit futures on the Polish interbank market, operating in the area of credit risk”, * the proposal of an approach to define operational events that may underlie instruments for the ORD, and the author’s several definitions of operational events and defining methods. Defining operational events for the ORD can accelerate further development of this class of instruments, helping to reduce the level of operational risk.

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