Financial Risk Manager Part 1
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Q-100.
How is economic capital distinguished from regulatory capital in terms of risk correlation treatment?
Q-100.
How is economic capital distinguished from regulatory capital in terms of risk correlation treatment?
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A
Regulatory capital considers correlations between credit, market, and operational risks, while economic capital adds them separately.
B
Both economic and regulatory capital would decrease when correlations between risks decrease.
C
Economic capital only covers expected losses, while regulatory capital covers unexpected losses.
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