[R-SIG-Finance] Incremental and Component VaR
Joe W. Byers
Joe-Byers at utulsa.edu
Wed Dec 6 17:03:26 CET 2006
After reading your documented links. The two source your are using
confuse the definitions of IVAR and Marginal VAR as describe in the risk
metrics documents. IVAR in your first source is the riskmetrics
definition. Marginal VAR in the second (sungard) is IVAR in the
riskmetrics definitions and IVAR in this source in Marginal VAR in the
This means you are not calculating the IVAR correctly.
Brian G. Peterson wrote:
> 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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