Answer-first summary for fast verification
Answer: A bank's activities are divided up into several different business lines, and a beta factor is calculated for each line of business., Economic capital covers the difference between the worst-case loss and the expected loss., Loss severity tends to be modeled with a lognormal distribution, but loss frequency is typically modeled using a Poisson distribution.
## Explanation **A is correct** - In the standardized approach for operational risk calculation, banks divide their activities into different business lines and calculate a beta factor for each line. **B is correct** - Economic capital indeed covers the difference between worst-case loss (Value at Risk) and expected loss. **C is correct** - Loss severity is typically modeled with a lognormal distribution, while loss frequency is modeled using a Poisson distribution in operational risk modeling. **D is not mentioned in the provided text** - The text cuts off before completing this statement, so we cannot verify its accuracy from the given information.
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In the standardized approach to calculating operational risk, which of the following statements is correct?
A
A bank's activities are divided up into several different business lines, and a beta factor is calculated for each line of business.
B
Economic capital covers the difference between the worst-case loss and the expected loss.
C
Loss severity tends to be modeled with a lognormal distribution, but loss frequency is typically modeled using a Poisson distribution.
D
Operational loss data available from data vendors tends to be biased towards large losses.