- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 41. Measuring and Managing Market Risk
- Subject 1. Value at Risk
CFA Practice Question
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.
Correct Answer: I, II and III
The historical simulation method has the advantage of incorporating events that actually occurred and not requiring the specification of a distribution or the estimation of parameters, but it is only useful to the extent that the future resembles the past.
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