Financial Risk Manager Part 1
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Which of the following statements about simulation is invalid?
A
The historical simulation approach is a nonparametric method that makes no specific assumption about the distribution of asset returns.
B
When simulating asset returns using Monte Carlo simulation, a sufficient number of trials must be used to ensure simulated returns are risk neutral.
C
Bootstrapping is an effective simulation approach that naturally incorporates correlations between asset returns and non-normality of asset returns, but does not generally capture autocorrelation of asset returns.
D
Monte Carlo simulation can be a valuable method for pricing derivatives and examining asset return scenarios.