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Disadvantages of non-parametric methods include the following:

• Analysis depends critically on historical data.

• Volatile data periods lead to VAR and ES estimates that are too high.

• Quiet data periods lead to VAR and ES estimates that are too low.

• Difficult to detect structural shifts/regime changes in the data.

• Cannot accommodate plausible large impact events if they did not occur within the sample period.

• Difficult to estimate losses significantly larger than the maximum loss within the data set (historical simulation cannot; volatility-weighting can, to some degree).

• Need sufficient data, which may not be possible for new instruments or markets