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Answer: 99.9 percentile confidence level and a 1-year time horizon.
## Explanation Under the Basel Committee's proposals for the Advanced Measurement Approach (AMA), operational risk capital must be calculated at a **99.9% confidence level** over a **1-year time horizon**. This means: - **99.9% confidence level**: The capital should be sufficient to cover operational risk losses with 99.9% certainty - **1-year time horizon**: The capital calculation is based on a one-year holding period This high confidence level reflects the need for banks to be well-protected against extreme operational risk events, while the one-year horizon aligns with typical risk management and regulatory reporting cycles. **Correct Answer: C**
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According to current Basel committee proposals, banks using the advanced measurement approach must calculate the operational risk capital charge at a:
A
99 percentile confidence level and a 1-year time horizon.
B
99 percentile confidence level and a 5-year time horizon.
C
99.9 percentile confidence level and a 1-year time horizon.
D
99.9 percentile confidence level and a 5-year time horizon.