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

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.

Quizplus · Accepted Answer

Historical simulation does not assume normality of the P&L return distribution, which allows for a more accurate calculation of VaR compared to the delta-normal method, which assumes normality.

Historical Simulation as a Method of Computing VaR Has the Following