) ARE PEARSON'S STATEMENTS REGARDING THE DISADVANTAGES OF THE HISTORICAL METHOD FOR ESTIMATING VAR MOST LIKELY CORRECT

4.) Are Pearson's statements regarding the disadvantages of the historical method for

estimating VaR most likely correct?

A.

No, the second statement is not a disadvantage.

B.

No, the first statement is not a disadvantage.

C.

Yes.

Answer = B

The nonparametric feature of the historical method is an advantage, not a disadvantage.

The historical method requires minimal probability-distribution assumptions compared

with other methods.

“Risk Management,” by Don M. Chance, Kenneth Grant, and John Marsland