During an interview for an operational risk analyst position at a prominent bank, the Chief Risk Officer (CRO) asks various questions related to the elements of operational risk assessment. Among the responses given by the candidate, which one is correct?

Exam-Like

Economic capital of a bank should be sufficient to cover both the expected and the worst-case operational risk losses of the bank.

16.6%

Loss severity and loss frequency are often modeled with lognormal and Poisson distributions, respectively.

49.8%

Operational loss data available from data vendors tend to be biased toward small losses but are particularly useful in determining loss frequency.

14.0%

The standardized approach used by banks in calculating operational risk capital requires the calculation of unexpected as well as expected losses.

19.6%

Financial Risk Manager Part 1