When using the Loss Distribution Approach (LDA) to modeling operational risk, which of the following is CORRECT?
　　A. The frequency dimension is more important than the severity dimension.
　　B. The frequency and severity dimensions are equally important.
　　C. Neither the frequency or the severity dimensions are important in the LDA methodology.
　　D. The severity dimension is more important than the frequency dimension.
　　Answer:D
　　The severity distribution is generally considered more important than the frequency distribution. This makes sense in that it is the severity of losses that has the larger impact on a firm. Losses that occur more frequently become more familiar and we gain experience in handling them. It is the impact of an infrequent, high impact loss that risk management is really all about.