medium · FRM Part 2 Market Risk
A risk manager is attributing VaR to different positions. Position A has a standalone VaR of $5 million. Its Component VaR in the portfolio is $3 million.
If the portfolio size is doubled by adding more of every current position proportionally, what happens to the Component VaR of Position A?
- It increases to $10 million.
- It doubles to $6 million.
- It remains $3 million.
- It increases to $4.24 million (scaling by √(2)).
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