CFA Practice Question

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CFA Practice Question

The advantages of the historical simulation method compared to the parametric method are that it ______

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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