In a scenario where a candidate is being interviewed for an operational risk analyst position at a leading bank, the Chief Risk Officer (CRO) asks various questions concerning the evaluation of operational risks. Among the responses given by the applicant, 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.

15.9%

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

55.7%

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

8.0%

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

20.5%

Financial Risk Manager Part 1