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Operational Risk & ResiliencyMedium

Dunmore Financial uses the Loss Distribution Approach (LDA) to model operational risk. The bank fits a Poisson distribution with lambda = 15 for loss frequency and a lognormal distribution with mu = 12.5 and sigma = 2.1 for loss severity. In a Monte Carlo simulation of 100,000 scenarios, the 99.9th percentile aggregate annual loss is $285 million. What does this figure represent?

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