Financial Risk Manager Part 2
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Within the context of the bank's capital planning framework and adhering to the Federal Reserve guidelines, when assessing the procedures used to model operational losses, which of the following methodologies or assumptions would the auditor consider most appropriate?
Within the context of the bank's capital planning framework and adhering to the Federal Reserve guidelines, when assessing the procedures used to model operational losses, which of the following methodologies or assumptions would the auditor consider most appropriate?
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A
Assuming a high positive correlation between operational loss severity and equity index movements during normal market conditions
0.0%
B
Using a net charge-off model to predict shorter-term credit losses and a roll-rate model to predict losses over a longer time horizon
4.8%
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