In a sense, this is an oxymoron. How can anything historical be fiction? It contradicts each other. Ah, but it is not history that is fiction. It is fiction with an historical basis.
The historical aspect of a fiction novel comes in many forms. It can be in the setting alone. Putting a story in Paris during the occupation makes a story a fictional story. The topic of the story could be something more modern in concern or focus as long as the setting is in some time in the past. If you write of a setting in World War I, the Civil War, Elizabethan England, South Africa during European colonization, or anything like that, you are writing an historical story. If the people are not historical….If the events are not historical, that is okay as long as the setting is set back in history. Then you still have an historical fiction story.
The setting can be modern day with the people involved being historical figures. You could be writing a science fiction story where people from the past come into the future. That can be described as an historical fiction as the people are historical and really existed. Books can cross many genres. You can find romances, mysteries, and more that are historical basis.
The actual characters of the book do not have to be historical. They can mention historical people during the period, but they never have to appear. The setting then makes it historical. The period is located in history. The people are accurately portrayed from the period. They don’t have to have existed. They just have to be set in an historical time.
Real life settings, people, and events set in a fictional story are what make an historical fiction story. An author can be writing a story about Abraham Lincoln. As long as the man was real and the setting is during his time period, the story can go anywhere…even have vampires….and it could be called an historical fiction piece of work. Fiction can be historical. The story doesn’t have to be true but it has to be set in history and/or have historical figures. Oxymoron? No, more like a creatively designed genre.