Financial Risk Manager Part 1
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The CRO of a large bank is interviewing a candidate for an operational risk analyst position. Which of the following statements made by the candidate concerning the measurement of operational risk is correct?
A
Economic capital of a bank should be sufficient to cover both the expected and the worst-case operational risk losses of the bank.
B
Loss severity and loss frequency are often modeled with lognormal and Poisson distributions, respectively.
C
Operational loss data available from data vendors tend to be biased toward small losses but are particularly useful in determining loss frequency.
D
The standardized approach used by banks in calculating operational risk capital requires the calculation of unexpected as well as expected losses.