Portfolio VaR and Asset VaR
Jan is correct. Value at Risk does not have the property of being 'coherent' in the sense described in Artzner's papers. R does have a coherent portfolio VaR available. You can call portfolio_method='component' in the VaR function in PerformanceAnalytics which will give you the portfolio VaR and how much each asset contributes to the overall portfolio VaR. Regards, Brian
On 06/03/2015 04:43 AM, Annaert Jan wrote:
I think this is perfectly possible. For instance, if A to E are individual stocks and P is, say, an equally weighted portfolio of these stocks. If firm-specific risk is high relative to systematic risk (which is typical), firm-specific risk may be to a large extent diversified away in P. As a consequence, VaR of P may be (much) smaller than each of the individual VaRs. HTH, Jan Annaert From: Christofer Bogaso <bogaso.christofer at gmail.com> Date: woensdag 3 juni 2015 05:55 Let say I have a diversified portfolio of 5 assets. The individual Asset VaRs for them are $A, $B, $C, $D, & $E. And the overall portfolio VaR is $P. Assumed all VaR numbers are reported in absolute number It appears that P is less than all 5 individual VaRs. Can that happen? I know that P < (A+B+C+D+E). However here in my calculation what happened is P is less than each asset VaR. Appreciate your view. Thanks and regards,