The Properties of Incremental VaR in Monte Carlo Simulations

Emerald - 2002
ZHENGWANG1
1Assistant professor at Baruch College, City University of New York in New York City

Tóm tắt

Incremental value‐at‐risk (VaR) is used to measure the effectiveness of diversification. However, the statistical properties of the estimated incremental VaR have not been fully explored. In this article, the author compares incremental VaR with other VaR‐based risk measures. The article derives the exact distribution of the estimated incremental VaR, when obtained using Monte Carlo simulation. The approach obtains general results with the implication that incremental VaR is dependent on the simulation method.

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