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. The CRO asks the candidate several questions about various aspects of operational risk measurement. Which of the following responses given by the candidate 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.