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Hi @David Harper CFA FRM,

I'm just reading through the Standardized Measurement Approach SMA. I was wondering how exactly the "loss component" part will be calculated in practice.

Let's assume we are in Bucket 3 and we have 10 Losses of EUR 150mm on average every year.

The loss component is 7x the average = 7 * EUR 1.5bn = EUR 11.5bn

Additionally we have to add to the loss component given the size of the losses, but how exactly do we do that?

Will we have to add another 7 * EUR 1.5bn to the loss component for losses > EUR 10mm and another 5 * EUR 1.5bn for losses > 100mm EUR or will we just have to add it once? Is it then the full average or only the part above EUR 10mm respectively above EUR 100mm?

The original source doesn't clarify so you are my last hope.

Thanks so much in advance!

I'm just reading through the Standardized Measurement Approach SMA. I was wondering how exactly the "loss component" part will be calculated in practice.

Let's assume we are in Bucket 3 and we have 10 Losses of EUR 150mm on average every year.

The loss component is 7x the average = 7 * EUR 1.5bn = EUR 11.5bn

Additionally we have to add to the loss component given the size of the losses, but how exactly do we do that?

Will we have to add another 7 * EUR 1.5bn to the loss component for losses > EUR 10mm and another 5 * EUR 1.5bn for losses > 100mm EUR or will we just have to add it once? Is it then the full average or only the part above EUR 10mm respectively above EUR 100mm?

The original source doesn't clarify so you are my last hope.

Thanks so much in advance!

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