# Historical Simulation

*Risk & Portfolio — Finicade finance glossary*

Historical simulation computes risk by revaluing today portfolio under every past market move in a window, then reading the loss percentile off it.

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.

**Also known as:** historical VaR, historical simulation VaR

**Related terms:** [Value at Risk (VaR)](https://finicade.com/glossary/value-at-risk), [Parametric VaR](https://finicade.com/glossary/parametric-var), [Monte Carlo Simulation](https://finicade.com/glossary/monte-carlo), [Backtesting](https://finicade.com/glossary/backtesting), [Fat Tails](https://finicade.com/glossary/fat-tails)

Source: https://finicade.com/glossary/historical-simulation