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Basic Question 5 of 6
One of the limitations of historical simulation is that ______
B. it can only reflect risks that are present in the sample.
C. it is a repetitive method.
D. it is only an alternative method.
A. bootstrapping is a big problem.
B. it can only reflect risks that are present in the sample.
C. it is a repetitive method.
D. it is only an alternative method.
User Contributed Comments 4
| User | Comment |
|---|---|
| danlan | The limitation comes from the fact that it's based on historic simulation. |
| NikolaZ | what is bootstrapping? |
| johntan1979 | In statistics, bootstrapping is a method for assigning measures of accuracy to sample estimates. This technique allows estimation of the sampling distribution of almost any statistic using only very simple methods. Generally, it falls in the broader class of resampling methods. Advantages A great advantage of bootstrap is its simplicity. It is straightforward way to derive estimates of standard errors and confidence intervals for complex estimators of complex parameters of the distribution, such as percentile points, proportions, odds ratio, and correlation coefficients. Disadvantages Although bootstrapping is (under some conditions) asymptotically consistent, it does not provide general finite-sample guarantees. Furthermore, it has a tendency to be overly optimistic. |
| sshetty2 | Johntans breakdown should be part of the summary for this LOS xD |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
Learning Outcome Statements
describe Monte Carlo simulation and explain how it can be used in investment applications
CFA® 2025 Level I Curriculum, Volume 1, Module 6.