Finance question about scenario analysis and simulation analysis
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Which of the following statements is most correct?
a. Sensitivity analysis is a good way to measure market risk because it explicitly takes into account diversification effects.
b. One advantage of sensitivity analysis relative to scenario analysis is that it explicitly takes into account the probability of certain effects occurring, whereas scenario analysis does not consider probabilities.
c. Simulation analysis is a computerized version of scenario analysis that uses continuous probability distributions of the input variables.
d. Statements a and b are correct.
e. All of the statements above are correct.
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Only c) is correct. Simulation analysis is a computerized version of ...
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