[R-SIG-Finance] Framework for VAR allocation among traders

Brian G. Peterson brian at braverock.com
Fri Mar 14 12:52:15 CET 2008

On Thursday 13 March 2008 22:32:59 adschai at optonline.net wrote:
> Hi,I'm looking for VAR allocation framework among traders. I saw some
> papers but none of which (at least that I saw) look practical. I am
> wondering if anyone can hint me some idea or some reference? The situation
> is if at the desk level you were given a certain amount of VAR limit, how
> should one allocate the number among traders? THank you.adschai

Calculate Component VaR.

The first definition (as far as I know) is in Garman in Risk Magazine.  The 
article may be found here:

Garman, Mark, "Taking VaR to Pieces (Component VaR)," RISK 10, 10, October 

He also has a longer working paper on the topic here:


We implemented Component VaR for assets with non-normal distribution in our 
recent paper here:

Boudt, Kris, Peterson, Brian G. and Croux, Christophe, "Estimation and 
Decomposition of Downside Risk for Portfolios With Non-Normal Returns" 
(October 31, 2007).

All code for our paper was implemented in R, and is available.  We will also 
be cleaning up and documenting the functions in the next version of 

    - Brian

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