Which approach to measuring market risk, in effect, amounts to simulating or creating artificial trading days and FX rate changes?
A)Back simulation approach.
B)Variance/covariance approach.
C)Monte Carlo simulation approach.
D)RiskMetrics Model.
E)All of the options.

Question

Quizplus · Accepted Answer

The Monte Carlo simulation approach involves generating artificial data to simulate various scenarios and estimating the likelihood of different outcomes. In the context of market risk measurement, this involves simulating or creating artificial trading days and foreign exchange rate changes to estimate potential losses or gains. The other options, while also used in market risk measurement, do not specifically involve creating artificial data through simulation.

Which Approach to Measuring Market Risk, in Effect, Amounts to Simulating