Question 26.4: In what respects are the models used to calculate economic c...
In what respects are the models used to calculate economic capital for market risk, credit risk, and operational risk likely to be different from those used to calculate regulatory capital?
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The models used for economic capital are likely to be broadly similar to those used to calculate regulatory capital in the case of market risk and operational risk. When calculating credit risk economic capital, a bank may consider it appropriate to use a different credit correlation model and different correlation parameters from those used in regulatory capital calculations.
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