wanganjie

 

3、The difference between marginal value at risk (MVAR) and incremental value at risk (IVAR) is that:

A) Incremental VAR computes actual changes in VAR for any additions of securities.

B) Incremental VAR only captures changes over small increments.

C) Marginal VAR captures non-linear changes in the portfolio.

D) Marginal VAR only captures changes over large increments.

wanganjie

 

The correct answer is A

Marginal VAR is an approximation of the changes in the VAR of the portfolio, in response to the addition of one unit (dollar) of a security, and is based on a linear relationship. Like duration, this linear relationship is only accurate for small additions. Incremental VAR computes the actual changes in portfolio VAR for any size additions to the portfolio. Incremental VAR involves the calculation of an entirely new VAR for the portfolio and is used when the changes in VAR cannot be described by a linear function.

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binsi

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neda

好帖子，顶一个

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