rahul.goyl
Member
Hi David,
Do you see anything wrong with this question, somehow am not able to relate this to A.
Question 51 - #67486
Which of the following is not a practical consideration in modeling severity distributions in the loss distribution approach (LDA)?
A) Placing too much emphasis on determining the appropriate capital reserve and not on the possibility of severe losses.
B) Extrapolating the data beyond those observed in the internal and external data set.
C) Explaining the model to colleagues in other departments.
D) Obtaining and calibrating external data.
Your answer: A was correct!
A practical consideration is to recognize that the analyst’s ultimate goal is to determine the operational risk capital reserve, and extrapolations could lead to the inclusion of extremely severe losses and an overestimation of the needed capital reserve
Regards,
Rahul
Do you see anything wrong with this question, somehow am not able to relate this to A.
Question 51 - #67486
Which of the following is not a practical consideration in modeling severity distributions in the loss distribution approach (LDA)?
A) Placing too much emphasis on determining the appropriate capital reserve and not on the possibility of severe losses.
B) Extrapolating the data beyond those observed in the internal and external data set.
C) Explaining the model to colleagues in other departments.
D) Obtaining and calibrating external data.
Your answer: A was correct!
A practical consideration is to recognize that the analyst’s ultimate goal is to determine the operational risk capital reserve, and extrapolations could lead to the inclusion of extremely severe losses and an overestimation of the needed capital reserve
Regards,
Rahul
