  To quantify an operational risk capital charge under Basel II, many banks
adopt a Loss Distribution Approach. Under this approach, quantification of the
frequency and severity distributions of operational risk involves the bank's
internal data, expert opinions and relevant external data. In this paper we
suggest a new approach, based on a Bayesian inference method, that allows for a
combination of these three sources of information to estimate the parameters of
the risk frequency and severity distributions.
