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AMA | IMA |
Introduction & Formulation
>According to this method, the Operational
Risk capital charge depends on the sum of the unexpected and expected losses
–Expected losses are computed by using bank historical
data
–Unexpected losses are found by multiplying
the expected losses by a factor, derived by sector analysis.
where,
i = Business line, j = Risk Type
γ =
Gamma Factor, fixed percentage for each business line predetermined by the
supervisor
EI = Exposure Indicator, the amount of risk for different
business lines
PE = Probability that a loss event occurs, the number of loss
events per the number of transactions
LGE = Losses Given such Events, the average loss amount per
transaction amount
