A Disadvantage of the Historic or Back Simulation Model for Quantifying

question 52

Multiple Choice

A disadvantage of the historic or back simulation model for quantifying market risk includes

• A)calculation of a standard deviation of returns is not required.
• B)calculation of the correlation between asset returns is not required.
• C)estimates of past returns used in the model may not be relevant to the current market returns.
• D)it accounts for non-standard return distributions.
• E)None of these.

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Definitions:

Positive Correlations

A relationship between two variables where changes in one variable are directly related to changes in the other variable in the same direction.

Availability

The ease with which a particular idea, memory, or piece of information can be recalled, often influenced by recent exposure or emotional impact.

Powerful Examples

Highly illustrative cases or scenarios used to explain or support a concept, making it easier to understand or remember.

False News

Information that is fabricated and disseminated with the intent to mislead or deceive the public, often for political or financial gain.