One Benefit of the Historic or Back Simulation Approach Is

question 47

True/False

One benefit of the historic or back simulation approach is that it does not need calculation of standard deviations and correlations (or assume normal distributions for asset returns) to calculate the portfolio risk figures.

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Definitions:

Indicator Variables

Indicator variables, also known as dummy variables, are used in statistical models to encode categorical data into binary form for analysis.

Indicator Variables

These are binary variables in a statistical model that take on values of 0 or 1 to indicate the absence or presence of a specific characteristic or attribute.

Omitted Category

In statistical modeling, it refers to a category or group within a variable that is excluded from analysis, often serving as a baseline against which other categories are compared.

Dummy Variables

Numerical variables used in regression analysis to represent subgroups of the sample in a binary form.