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Basic Question 14 of 19
The main disadvantage of the Monte Carlo simulation is that is ______.
B. cannot accommodate portfolios with embedded options.
C. can be complex and time-consuming to use.
A. is based on the assumption that history will repeat itself, from a risk perspective.
B. cannot accommodate portfolios with embedded options.
C. can be complex and time-consuming to use.
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Learning Outcome Statements
explain the use of value at risk (VaR) in measuring portfolio risk;
compare the parametric (variance -covariance), historical simulation, and Monte Carlo simulation methods for estimating VaR;
estimate and interpret VaR under the parametric, historical simulation, and Monte Carlo simulation methods;
describe advantages and limitations of VaR;
describe extensions of VaR;
CFA® 2025 Level II Curriculum, Volume 5, Module 41.