Five reasons why regulators should approve the loss-distribution approach
The Basel Committee shied away from the most risk-sensitive way of calculating an op risk charge, says Michael Haubenstock. He argues for a green light.
They should change their minds and ensure that the method - the loss distribution approach (LDA) - is an option in the new capital adequacy accord they intend introducing for international banks.
With LDA a bank specifies its own operational loss distributions, business lines and risk types for
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