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Advanced Measurement Approach (AMA

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Under AMA the banks are allowed to develop their own empirical model to quantify required capital for operational risk. Banks are able to approximate unexpected losses.

The Four Data Elements
According to the BCBS Supervisory Guidelines, an AMA framework must include the use of four data elements i) Internal loss data (ILD), ii) External data (ED), iii)Scenario analysis (SBA), and iv) Business environment and internal control factors (BEICFs).

and a severity distribution that describes the loss amount of a single loss event. called unit of measure's (UoMs).Approaches Of AMA Loss Distribution Approach (LDA) • With LDA. a bank first segments operational losses into homogeneous segments. and a severity distribution that describes the loss amount of a single loss event. Other Approaches to AMA • Scorecard Method • Internal Modeling . • For each unit of measure. • A bank will develop a frequency distribution that describes the number of loss events in a given year. the bank then construct a loss distribution that represents its expectation of total losses that can materialize in a one-year horizon • A bank will develop a frequency distribution that describes the number of loss events in a given year.