Historical Simulation
Also called: historical VaR, historical simulation VaR
Historical simulation computes risk by revaluing today's portfolio under every past market move in a chosen window, then reading the loss percentile straight off the results. It assumes no distribution, so it captures fat tails and skew automatically. Its limits are its window: nothing worse than the worst day in the sample can ever appear, and a quiet two-year window will report reassuringly small risk right up to the crash.
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