Is a going concern scenario above the 90th percentile or is it between 90th and 95th percentile?
Let's say for example we have a scenario at the 97th percentile, but it's not very severe. Would that be a Solvency scenario or Going-concern scenario?
First of all, just to be clear, my reading of the text is that the percentiles refer to the severity distribution. There doesn't seem to be any mathematical discussion of appropriate frequency levels.
Anyway, I think the intent is that going-concern scenarios fall between the 90th and 95th percentile, but this is not an explicit rule, just a recommendation. That means a scenario at the 97th percentile might still be a going-concern scenario if it wasn't very likely.
But based on the pattern of past DCAT problems such as these:
I would base my selection of a going-concern scenario on a percentile range of 90-95, and a solvency scenario above 95 (and possibly below 99, since anything above 99 may no longer be considered plausible.)
Unfortunately there isn't an example in the source text, but if you explain yourself (briefly) you should be ok on the exam. The graders are usually fine as long as they can tell you understand the concept, even if you reach a different conclusion from theirs.
Comments
First of all, just to be clear, my reading of the text is that the percentiles refer to the severity distribution. There doesn't seem to be any mathematical discussion of appropriate frequency levels.
Anyway, I think the intent is that going-concern scenarios fall between the 90th and 95th percentile, but this is not an explicit rule, just a recommendation. That means a scenario at the 97th percentile might still be a going-concern scenario if it wasn't very likely.
But based on the pattern of past DCAT problems such as these:
I would base my selection of a going-concern scenario on a percentile range of 90-95, and a solvency scenario above 95 (and possibly below 99, since anything above 99 may no longer be considered plausible.)
Unfortunately there isn't an example in the source text, but if you explain yourself (briefly) you should be ok on the exam. The graders are usually fine as long as they can tell you understand the concept, even if you reach a different conclusion from theirs.