Lecture 6.1: Historical Simulation Approach

Question 1

Which of the following statements about historical simulation approach are false? (Select 1-5)
A) It is the most popular approach for calculating VaR and ES for market risk
B) It uses past data as a guide to what will happen in the future
C) It assumes that returns/losses are normally distributed
D) It removes the need to assume that returns are normally distributed, and instead uses empirical distribution
E) The basic idea is that every day in the historical data set is a possible outcome for the return on the next day

Answer 1

WRONG: C) It assumes that returns/losses are normally distributed