Hi David,

How sum of marginal capital alloations is less than the total economic capital required for the bank?

Anil

Hi Anil,

Apologies, but i don’t know the context of “marginal capital allocations” (forgive me, I may have said it but i don’t know when so far this year!). Marginal implies Marginal VaR, to me, in Jorion 7.

Or perhaps you refer to an outcome related to the fact the VaR is subadditive (but again, i have trouble with the term “marginal"). VaR, lacking the coherent condition of sub-additivity, can give a result where: the sum of individual or component VaRs is less than portfolio VaR. (e.g., http://www.bionicturtle.com/learn/article/illustration_of_vars_failure_to_meet_coherence/) But I can’t tell if your questions refer to this or not?

David