Answer: The bootstrapping methods, either naïve or sophisticated, rely upon the underlying assumption that the data are iid.

## Explanation The incorrect statement is **C**. While bootstrapping does assume that data are independent and identically distributed (iid), this is not an absolute requirement for all bootstrapping methods. More sophisticated bootstrapping techniques (such as block bootstrap or moving block bootstrap) can handle certain types of dependence in the data, particularly autocorrelation. The text explicitly states that bootstrapping "does not generally capture autocorrelation of asset returns," indicating that while it's a limitation, the assumption of independence is not absolute for all bootstrap methods. Let's verify the other statements: - **A** is correct: Monte Carlo simulation for option pricing does use risk-neutral valuation. - **B** is correct: Bootstrapping involves random sampling with replacement from the original dataset. - **D** is correct: If the data generating process is misspecified, Monte Carlo results will be unreliable.

Author: LeetQuiz Editorial Team