IRB approach

rinky63a
Good Student
Posts: 15
Joined: Fri Jul 27, 2012 3:42 pm

IRB approach

Postby rinky63a » Mon Oct 14, 2013 12:33 pm

Which of the following statements is the least accurate about the foundation IRB and the advanced IRB approaches for credit risk capital charge in the Basel II?
Select one:
a. EAD, and correlation coefficient, within the risk-weight functions provided by the supervisors.
b. Banks adopting the advanced IRB approach are expected to continue to employ this approach.
c. A voluntary return to the standardized approach is permitted Under both foundation IRB and advanced IRB approaches, the expected loss is not included in the credit risk capital charge.
d. Under the advanced IRB approach, banks are allowed to use their own estimates of PD, LGD, EAD, and correlation coefficient, within the risk-weight functions provided by the supervisors.
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The correct answer is D
Under the advanced IRB approach, banks are allowed to use their own estimates of PD, LGD, EAD, and correlation coefficient, within the risk-weight functions provided by the supervisors.
Under the advanced IRB approach, banks are allowed to provide their own estimate of PD, LGD, and EAD, but must use the correlation coefficient formula specified by the supervisor.

Is statement C correct. Are banks allowed to return to Standardized approach ?

pradeeppdy
Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm

IRB approach

Postby pradeeppdy » Mon Nov 18, 2013 12:17 pm

Hi Rinky ,
Can you please provide the source of Question.


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