medium · FRM Part 2 Market Risk
Under the Euler decomposition of portfolio risk, what does 'Component VaR' represent?
- The part of the total portfolio VaR that is additively attributed to a specific position, such that the sum of components equals the total.
- It measures the sensitivity of total portfolio VaR to a small, marginal per-unit change in one position's size in the book.
- The standalone VaR of one position held in isolation, ignoring diversification benefits and correlation with the rest of the portfolio.
- The discrete change in total portfolio VaR observed from fully adding or removing one specific position from the overall trading book entirely.
Sign up free to see the explanation and track your rank →
More FRM Part 2 Market Risk practice
- Which of the following statements correctly identifies a structural deficiency of the Gaus
- If the shape parameter is ξ = 0.25, what is the tail index α?
- A leptokurtic distribution, often modeled by EVT, is characterized by which of the followi
- In the GPD framework, if the threshold u is chosen too low, what is the most likely error
- If a bank records 11 exceptions in a 250-day backtesting window for 99% VaR, what is the r
- A fund manager calculates the 'Marginal VaR' for an equity p… — What does this metric spec
- Which fixed-income mapping technique treats a bond portfolio as a single zero-coupon bond
- What happens to the mean of a GPD-distributed variable if the tail index ξ ≥ 1?