[R-SIG-Finance] [R-sig-finance] VaR

King, David David.King at schroders.com
Tue Mar 3 13:05:12 CET 2009


If I recall correctly there are some examples of this in the following book:

Risk Measures for the 21st Century, Giorgio Szegö (Editor) 



-----Original Message-----
From: r-sig-finance-bounces at stat.math.ethz.ch [mailto:r-sig-finance-bounces at stat.math.ethz.ch] On Behalf Of Bogaso
Sent: 03 March 2009 11:21
To: r-sig-finance at stat.math.ethz.ch
Subject: [R-SIG-Finance] [R-sig-finance] VaR

I frequently hear Value at risk i.e. VaR is not a coherent risk measure because, sum of VaR for two individual assets may be LOWER than VaR of portfolio consists of that two aseets i.e. VaR may not be sub-additive. However when I calculate VaR for general assets like Equity, commodity etc, I see that VaR is actually sub-addtive i.e. portfolio VaR is always less than sum of individuals, which is reported as "diversification benefit". Can anyone give me a particular example why VaR is not sub-additive?

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