
I will be concentrating more on the internal models based approach (IMA) in this article. Having said that, I will provide a quick overview on the standarised approach (SA) to ensure that the readers are familiar with the concept. However I will avoid taking a deep dive into the SA approach due to its simplicity.
A homomorphism is a type of function which takes elements in some domain with a method of combining to elements of another domain with another method of combining, while obeying certain rules to preserve structure. Letting *, + mean two operations (not necessarily multiplication and addition), these rules are