rahul.goyl
Member
Hi david,
The VaR techniques means WCL - EL = UL, then how the WCL is calculated for Ops Risk.
Plz advice if am getting this one correctly.
Operational risk type losses range from high frequency low severity(HFLS) to low frequency high severity (LFHS) often seen as a lognormal distribution. The allocation of an institution's capital should is applied against LFHS and Extreme tail events. Which of the following is true about the tools used to measure these losses,
I. EL measures the anticipated operational losses from HFLS events.
II.VAR techniques can be used to measure unexpected losses.
III.LFHS events typically fall in the area of the extreme tail (can be measured by the extreme value theory. )
Choose one answer.
a. II and III only
b. I, II and III
c. I, II only
d. I, III only
The correct answer is: II and III. While high frequency, low severity events can be modeled easily from past data, unexpected and high-stress losses are uncommon and more difficult to assess the probabilities of loss.
Regards,
Rahul
The VaR techniques means WCL - EL = UL, then how the WCL is calculated for Ops Risk.
Plz advice if am getting this one correctly.
Operational risk type losses range from high frequency low severity(HFLS) to low frequency high severity (LFHS) often seen as a lognormal distribution. The allocation of an institution's capital should is applied against LFHS and Extreme tail events. Which of the following is true about the tools used to measure these losses,
I. EL measures the anticipated operational losses from HFLS events.
II.VAR techniques can be used to measure unexpected losses.
III.LFHS events typically fall in the area of the extreme tail (can be measured by the extreme value theory. )
Choose one answer.
a. II and III only
b. I, II and III
c. I, II only
d. I, III only
The correct answer is: II and III. While high frequency, low severity events can be modeled easily from past data, unexpected and high-stress losses are uncommon and more difficult to assess the probabilities of loss.
Regards,
Rahul
