medium · FRM Part 2 Risk & Investment Management
The total VaR of a portfolio is $100 million. Desk A has a Component VaR of $40 million.
If the bank decides to liquidate Desk A, will the bank's total VaR fall by exactly $40 million?
- Yes, because Component VaR is an additive Euler allocation.
- Yes, because Desk A's Marginal VaR is $40 million per desk.
- No, it will fall by exactly Desk A's Individual VaR.
- No, the actual fall will be given by the desk's Incremental VaR.
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