21. Which of the following outcomes is NOT associated with an operational risk process?

A. The sale of call options being booked as a purchase

B. A monthly volatility is inputted in a model that requires a daily volatility

C. A loss is incurred on an option portfolio because ex post volatility exceeded expected volatility

D. A volatility estimate is based on a time-series that includes a price that exceeds the other prices by a factor of 100

Correct answer is Cfficeffice" />

Choices A, B, and D are outcomes that are associated with an operational risk process.  Operational risk is the risk of loss caused by failure in operational process or systems that support them.  Equivalently, operational risk is the breakdowns of people, processes, and systems within an organization.  Given this definition, choices A, B, and D are outcomes that are associated with an operational risk process.

Reference: Understanding Market, Credit, and Operational Risk, Allen, Boudoukh, and Saunders, 2004

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