Operational Risk - Rgulatory Capital Under Basel II
6 important questions on Operational Risk - Rgulatory Capital Under Basel II
What did basil II say about operational risk
What are the three different methods?
1. Basic indicator approach. Operational risk capital is set equal to 15% of annual gross income over the previous three years.
2. Standarized approach, a slightly more complicated approach. The approach entails to devide the bank into eight business lines, the average gross income over the last three years for each business line is multiplied with a beta factor and that amount summed is determining the total capital for operational risk.
3. The third approach is the advanced measurement approach.
What does the AMA (Advanced Measurement Approach) do?
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How to calculate VaR under AMA?
Where can data about operational risks be obtained?
How can external data be scaled to internal data, when the revenue (size) of the banks differs?
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