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Basic Question 5 of 19
The advantages of the historical simulation method compared to the parametric method are that it ______
II. does not assume the normal distribution.
III. can accommodate options.
I. is based on what actually happened.
II. does not assume the normal distribution.
III. can accommodate options.
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
explain the use of value at risk (VaR) in measuring portfolio risk;
compare the parametric (variance -covariance), historical simulation, and Monte Carlo simulation methods for estimating VaR;
estimate and interpret VaR under the parametric, historical simulation, and Monte Carlo simulation methods;
describe advantages and limitations of VaR;
describe extensions of VaR;
CFA® 2025 Level II Curriculum, Volume 5, Module 41.