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A risk management professional at a bank is attempting to determine the distribution of potential losses stemming from operational risks (e.g., internal fraud, system failures, and other disruptions). However, the professional is facing a challenge due to the limited availability of historical data on these types of losses. Considering this constraint, what is the most effective approach to accurately estimate the severity of these operational losses?
A
Generate additional data using Monte Carlo simulation and merge it with the bank's internal historical data.
B
Estimate the parameters of a Poisson distribution to model the loss severity of operational losses.
C
Estimate relevant probabilities using loss information that is published by credit rating agencies.
D
Merge external data from other banks with the bank's internal data after making appropriate scale adjustments.