Why, when and how should loss data be scaled?

Economies of scale

Eric Cope at Bank of America

The Basel II advanced measurement approach (AMA) for operational risk requires banks to incorporate loss data from external sources in the estimation of their capital requirements. But using a public or consortium-managed external loss database can often mean facing a bewildering array of loss types from a highly diverse set of sources. Although the Basel regulations provide a structure for classifying losses according to business line and loss type, there is no firm guidance on accounting for

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