Is Component VaR a good measure?

Discussion on Value-at-Risk Models
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gustavo.wolf
Posts: 1
Joined: Tue Aug 26, 2014 2:16 pm

Is Component VaR a good measure?

Postby gustavo.wolf » Thu Aug 28, 2014 9:22 am

Hello,
I am looking for a measure that will let me decompose my portfolio and show users how much risk is used by each of its components.

As we are going to implement VaR methodologies, I’ve thought of using Component VaR (http://www.fea.com/resources/a_endsearchvar.pdf). The pros are that it adds up to total portfolio VaR and has a sign, thus showing if a certain component contributes to increase or reduce the total risk within the portfolio.

Is this in your experience a sensible measure? Would you rather recommend a different one?

Thanks a lot and best regards,

Gustavo Wolf

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