ABSTRACT
INTRODUCTION Market risk and credit risk are highly visible risk classes: markets move every day and clients o en default. Operational risk in contrast is more opaque and less easy to trace. It came to prominence as a result of its inclusion as a risk class attracting regulatory capital in Basel II [see Chapter 7 for more details]. Having been told by regulators that they needed to control, measure and allocate capital against operation risk, the industry has spent considerable e ort in recent years trying to make sense of this risk class, and now it has a comparable importance for many institutions to its sister risk classes of market and credit risks. e rst part of the chapter introduces some of these developments.
