ERM Glossary: Advanced measurement
approach (AMA)
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In Basel II/III, the advanced measurement approach (AMA)
(for operational risk) allows firms to calculate the operational risk
regulatory capital charge using the bank’s internal operational risk
measurement modelling system. Firms doing so can use their own internal models
that must be pre-approved by supervisors. Their calculations need to involve:
(a) Collection of
data on their operational risk losses;
(b) Combination of this
data with external data; and
(c) Use of key risk
indicators and self-assessments.
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