Financial Risk Manager Part 1
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Ultimate access to all questions.
In the realm of operational risk analysis, where historical data on operational risk losses is limited, what is the most effective strategy for an analyst to adopt in order to estimate a bank's loss severity distribution accurately?
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.