Answer: SA

## Explanation The correct answer is **C. SA** (Standardized Approach). ### Key Points: - **SA (Standardized Approach)**: This approach uses external credit ratings to determine risk weights for different exposure categories. It can be applied consistently across various asset classes including: - Equity exposures - Large corporations - Financial institutions - **IRB (Internal Ratings-Based Approach)**: This is a more advanced approach where banks use their own internal models to estimate credit risk parameters. It requires regulatory approval and is typically used for more sophisticated banks. - **F-IRB (Foundation IRB)**: This is a specific type of IRB approach where banks estimate probability of default (PD) but use supervisory estimates for other parameters like loss given default (LGD). - **BIA (Basic Indicator Approach)**: This is used for operational risk capital calculation, not credit risk. ### Why SA is the correct answer: The Standardized Approach is designed to be broadly applicable across different types of exposures without requiring sophisticated internal models. It provides a standardized framework that can handle various asset classes simultaneously, making it suitable for equity, large corporations, and financial institutions under a unified methodology.

Author: LeetQuiz .