medium · FRM Part 1
A risk manager observes that a 1-day Historical Simulation VaR at 99% confidence is $1 million.
If the manager scales this to a 10-day VaR using the √(10) rule, what assumption is being made?
- That the portfolio's underlying assets have linear payoffs.
- That the VaR distribution is non-parametric.
- That the historical P&L outcomes are independent and identically distributed (i.i.d.) over time.
- That the Historical Simulation window is long enough to capture 10-day cycles.
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