hard · 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.
- The sensitivity of the portfolio VaR to a small per-unit change in the position size.
- The VaR of a position if it were held in isolation, ignoring all correlations with other assets.
- The change in total portfolio VaR if a specific position is added to or removed from the portfolio.
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