[R-SIG-Finance] Incremental and Component VaR

Brian G. Peterson brian at braverock.com
Tue Dec 5 23:35:19 CET 2006

I have previously posted several functions for analysis of the higher 
moments of a returns distribution here:


including a function to calculate modified Cornish-Fisher VaR.

I've intermittently tried to implement Incremental (or Component) VaR.

I could really use some help debugging this function.  In Incremental VaR, 
the Incremental VaR of each component of the portfolio should all add up 
to the total VaR of the portfolio.  Several papers suggest that this 
should work with either traditional (RiskMetrics) VaR or with modified 
Cornish-Fisher VaR.

Unfortunately, I can't get it to work with either VaR calculation, so I 
must have an error in my logic somewhere.

Help would be greatly appreciated in fixing this function.  My 
IncrementalVaR function begins on line 610 of the referenced 
extra_moments.R file

Thanks in advance for any assistance.


  - Brian


Incremental and Component VaR is described many places in the literature, 
Beyond the VaR Horizon, Gaussel, et. al.

Incremental, Marginal, and Component VaR, 2004, Denton and Jayaraman


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