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Briefly explain the historical simulation approach to compute value at risk (VaR). Two risk managers compute VaRs for the same portfolio over the same horizon
Briefly explain the historical simulation approach to compute value at risk (VaR). Two risk managers compute VaRs for the same portfolio over the same horizon at the same confidence level, using the same data, but their results differ. Based on their reported VaRs, can you say who of them used the historical simulation method, and who used the deltanormal approach, if you know they could only use one of these two methods?
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