When building a operational loss distribution by combining a loss frequency distribution and a loss severity distribution, it is assumed that:
I. The severity of losses is conditional upon the numberof loss events
II. The frequency of losses is independent from the severity of the losses III. Both the frequency and severity of loss events are dependent upon the state of internal controls in the bank
Under the KMV Moody's approach to calculating expectingdefault frequencies (EDF), firms' default on obligations is likely when:
According to the implied capital model, operational risk capital is estimated as:
