Does Basel II add up?
Are there inconsistencies in the standardised and advanced measurement approaches of the Basel II regulatory framework? Andreas Jobst considers the evidence
The advanced measurement approaches (AMA) of operational risk under the new regulatory framework of Basel II (Basel Committee, 2006b) contain several shortcomings concerning analytical rigour and consistent implementation of: (i) capital adjustment of operational risk estimates; (ii) home-host recognition; and (iii) volume-based measures of operational risk (Jobst, 2007a and 2007b).
Capital adjustment of operational risk estimates under AMA
The quantitative criteria of the AMA soundness
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