medium · FRM Part 2 Risk & Investment Management
Which of the following identifies the fundamental difference between Incremental VaR and Marginal VaR?
- Incremental VaR is used primarily for risk attribution, while Marginal VaR is used for trade evaluation.
- Marginal VaR is always mathematically larger in magnitude than Incremental VaR for any comparable trade.
- Marginal VaR fully accounts for correlation across positions, while Incremental VaR assumes portfolio assets are independent.
- Incremental VaR is a discrete measure requiring full revaluation, while Marginal VaR is a continuous derivative.
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