Explanation:
Monte Carlo simulation requires an assumed distribution—or some form of data—to draw observations. Bootstrapping uses actual data.
(Book 2, Module 24.2, LO 24.d)
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Question 84
A fund manager was just charged with performing a Monte Carlo simulation to calculate various risk management estimates. The manager realizes there are alternatives to Monte Carlo—one of them being bootstrapping. Which of the following most accurately indicates a factor of each method?
A
Monte Carlo and bootstrapping use actual data to calculate distributional data.
B
Monte Carlo uses actual data to calculate distributional data, whereas bootstrapping models data based on assumed distributional assumptions.
C
Monte Carlo assumes distributional characteristics to generate output, whereas bootstrapping samples from existing data to generate output.
D
Monte Carlo and bootstrapping use expected data to calculate distributional data.
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