From Open Risk Manual


Correlation in Risk Management context denotes any one from a class of quantitative measures of Dependency between different risk realizations. Its precise meaning and calculation varies depending on the risk area.


Issues and Challenges

  • Excessive focus on the simpler correlation measures can misrepresent the true nature of the dependency
  • Empirical estimates of correlation tend to be unstable
  • Correlations are particularly difficult to establish for risk types such as operational risk
  • Correlation versus Causation