Learning objectives: Define, calculate, and distinguish between the following portfolio VaR measures: diversified and undiversified portfolio VaR, individual VaR, incremental VaR, marginal VaR, and component VaR. Explain the impact of correlation on portfolio risk.
Hi @David Harper CFA FRM,
I wanted to start a new topic which has not yet been discussed in great detail.
Jorion mentions on page 170 that a particular new trade involves a position in one risk factor (asset). The portfolio value changes from the old value of W to a new value of W(p+a) = W +...
I'm somewhat confused between Marginal and Incremental VAR. Am i right to say that the only difference between the two is that Incremental VAR is calculated precisely from a total revaluation of the portfolio and that Marginal VAR is just an estimation of the change in VAR?
Hi, Andrew raises a good question here, with respect to GARP's sample question. The setup gives a typical two-asset portfolio with correlations and asks, "If asset 1 is dropped from the portfolio, what will be the reduction in portfolio VaR?" I think that's a bit of a mean question because it...