Historical simulation as a method of computing VaR has the following major benefit in comparison to the delta-normal method:
A)It is a faster approach.
B)It uses past returns to forecast future returns.
C)It requires the same number of parameters as the delta-normal method.
D)It does not assume normality of the P&L return distribution.

Question

Quizplus · Accepted Answer

Simulation is slow relative to the analytic delta-normal method.Assuming that the past gives a good picture of the future is not always a safe assumption.There is no parameterization of the simulation as the method simply draws samples from past history.The big benefit is that it does not require the restrictive assumption that returns are normal,which is known to be empirically invalid.

Historical Simulation as a Method of Computing VaR Has the Following