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What influences the size or the magnitude of the risk charge?

User DataFramed
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Final answer:

The factors that influence the size or magnitude of the risk charge in business include risk factors, volatility, expected loss, correlation, and duration.

Step-by-step explanation:

Several factors can influence the size or magnitude of the risk charge. These factors include:

  • Risk factors: The more significant and numerous the risk factors associated with a particular activity or investment, the higher the risk charge will be.
  • Volatility: The higher the volatility of the underlying asset or market, the higher the risk charge will be.
  • Expected loss: If the expected loss from a particular activity or investment is higher, the risk charge will be larger.
  • Correlation: The correlation between different risk factors can also impact the risk charge. A higher correlation can result in a higher risk charge.
  • Duration: The length of time over which the risk is expected to materialize can also influence the risk charge
User Sixta
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