Monte Carlo Is Widely-Used Approach for Computing VaR

question 25

Multiple Choice

Monte Carlo is widely-used approach for computing VaR. Relative to other methods which of the following is a benefit of using this approach?

• A) It is fully flexible in parameterizing the forward-looking distribution.
• B) It always requires very few parameters.
• C) It always uses normality.
• D) It is the fastest approach to computing VaR.

---

Definitions:

Allocation of Resources

The process of distributing available resources among various uses or projects in order to achieve desired outcomes or maximize efficiency.

Political Decision-Makers

Individuals or bodies responsible for making policies and decisions that guide the political direction of a country, region, or organization.

Well-being

The state of being comfortable, healthy, or happy; often considered in terms of physical, psychological, and social aspects.

Economic Theory

A set of principles and concepts that helps to explain economic behavior and predict future patterns.