Thanks Simon,
Can I say this to check if I understand;-
"Copula is closed form, Monte Carlo is not."
However I think the examiners' wording was confusing.
Part (1);- "Adopt separate frequency and severity distributions for each risk." is the one that uses Monte Carlo to simulate via the inverse transform method.
Part (2);- "Combine the various frequency and severity distributions into a single aggregate operational loss distribution using Monte Carlo simulation." has nothing to do with a simulation and is a SUMPRODUCT in excel.
I'm i still dreaming?
Last edited by a moderator: Aug 4, 2014