Simulation Methods – Module 6 – Quantitative Methods – CFA® Level I 2026

Get our FREE CFA Level 1 summaries: https://www.finquiz.com/cfa/level-1/summary 📉 Quant Methods Got You Spiraling? FinQuiz = Your CFA Lifeline Quant isn’t just plug-and-chug. It’s logic, timing, and not getting trapped on exam day. Whether you're battling z-scores or trying to remember if it's n or n–1, we’ve got your back. 📎 Battle-Ready Summaries – No fluff, no chaos. Just the core Quant ideas, explained clearly 👉 https://www.finquiz.com/cfa/level-1/summary/ 🧷 Stanley Notes – Clean breakdowns of complex concepts (yes, even heteroskedasticity) 👉 https://www.finquiz.com/cfa/level-1/notes/ 📌 Formula Sheet – All the essentials on one page. Screenshot it. Tattoo it. Just don’t forget it. 👉 https://www.finquiz.com/cfa/level-1/formula-sheet/ 🎮 Question Bank – Practice like you mean it. Real CFA-style traps, logic puzzles, and curveballs 👉 https://www.finquiz.com/cfa/level-1/question-bank/ ⏱ Mock Exams – Time pressure. Real feel. Actual anxiety simulator (but also confidence booster) 👉 https://www.finquiz.com/cfa/level-1/mock-exam/ 🧃 Explore All CFA Level 1 Resources 👉 https://www.finquiz.com/cfa/level-1/ 💸 Want the full upgrade? Go Premium = Everything unlocked + guidance to crush Level 1 👉 https://www.finquiz.com/cfa-level-1-study-packages/ 00:00 Introduction: Log Normal Distributions, Monte Carlo & Bootstrapping Overview of key concepts for CFA Level 1 Why these tools matter for dealing with market uncertainty 00:24 Log Normal Distributions Explained Difference from normal distributions (, positively skewed) Application to stock prices and continuously compounded returns 01:39 Continuously Compounded Returns & Stock Prices Relationship between future stock price and log normal distribution Holding period return vs. continuously compounded return 02:56 IID Assumptions & Volatility Measures Independently and identically distributed returns Annualized volatility formula High vs. low volatility stocks in risk assessment 05:08 Monte Carlo Simulation: Steps & Applications Specify underlying variables (e.g., stock price) Define time period & assumption about risk factors Distributional assumptions (random draws from known distributions) Estimate underlying variables & option values Discount to present value Repeat thousands of times to derive mean estimate Use cases: pricing complex securities (options, MBS), risk analysis 08:00 Bootstrapping & Resampling Difference between bootstrapping and other sampling methods Drawing new samples “with replacement” from existing data Estimating parameters (mean, variance) directly from empirical data 09:30 Monte Carlo vs. Bootstrapping Monte Carlo Simulation: generates new data from assumed distributions Bootstrapping: resamples existing empirical data When to use each approach in finance 12:02 Conclusion & CFA Exam Tips Recap of key terms: log normal distribution, continuous compounding, Monte Carlo, bootstrapping Importance for risk management and investment modeling Final reminder to practice and review for CFA Level 1