Explanation

Correct Answers: A and B

Both options A and B are steps performed in Monte Carlo simulation but not in historical simulation.

Detailed Analysis:

• A: Generation of random numbers from a distribution - This is unique to Monte Carlo simulation. Historical simulation resamples from actual historical data rather than generating random numbers from distributions.

• B: Selection of a statistical distribution for key decision variables - This is also unique to Monte Carlo simulation. Historical simulation does not require selecting statistical distributions since it uses the empirical distribution of historical data.

Key Differences:

• Monte Carlo Simulation: Uses parametric distributions, generates random scenarios, requires distribution selection
• Historical Simulation: Uses empirical distribution, resamples historical data, no distribution assumptions needed

Both steps A and B distinguish Monte Carlo from historical simulation approaches.