Portfolio Risk Analytical Methods Flashcards Preview

Section 8.2: IRM - Investment Risk Management > Portfolio Risk Analytical Methods > Flashcards

Flashcards in Portfolio Risk Analytical Methods Deck (7)
Loading flashcards...
1

Describe and state the notation for individual VAR.

 Definition: The VAR of one component taken in isolation.

 Notation: VARi

2

Describe and state the formula for undiversified VAR.

 Definition: The sum of individual VARs (assumes perfect, positive correlation)

 Formula: sum(VARi)

3

Describe and state the notation for portfolio/diversified VAR.

  •  Definition: VAR taking into account diversification benefits between components
  •  Notation: VARp

4

Describe and state the notation for marginal VAR.

  •  Definition: Change in portfolio VAR resulting from taking an additional dollar of exposure to a given component
  •  Notation: delta(VARi)

5

Describe and state the formula for incremental VAR.

  •  Definition: Change in VAR owing to a new position.
  •  Formula: VARp+a - VARp

6

Describe and state the notation for component VAR.

  •  Definition: How much the portfolio VAR would change if the given component was deleted
  •  Notation: CVARi

7