Which of the following is false of the historical VaR? a. It is based on normal distribution of returns b. It does not make use of Monte Carlo simulations c. It assumes no
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
It is based on
It does not make use of Monte Carlo simulations
It assumes no underlying distribution of returns.
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