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A risk manager at an investment management firm is using historical data to estimate the variation in returns of a group of assets over time. The manager is considering switching from the Monte Carlo simulation method, which the firm currently uses, to the bootstrapping method to estimate confidence intervals for asset returns. Which of the following statements will the manager find to be correct regarding bootstrapping?
A
Similar to Monte Carlo simulation, bootstrapping requires a normal distribution of returns to generate an accurate estimate of the confidence interval.
B
Similar to Monte Carlo simulation, an incorrect assumption about the distribution of returns when using bootstrapping will produce an inaccurate confidence interval.
C
Unlike Monte Carlo simulation, bootstrapping does not require the specification of a model to estimate the confidence interval.
D
Unlike Monte Carlo simulation, bootstrapping can increase the accuracy of the estimated confidence interval.