Aggregating Individual VaRs to arrive at Firm-wide VaR
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1. Context
In this short video from the FRM Part 2 curriculum, we explore the formula for aggregating VaRs computed for each business line or division to arrive at the firm-wide VaR at the same confidence level and horizon. Along the way, we take a look at the assumptions we made in arriving at the formula. The details of the reading in which this topic appears are given below:
| Area | Investment Management and Current Readings |
| Reading | Portfolio Risk: Analytical Methods |
| Reference | Philippe Jorion, Chapter 7. Portfolio Risk: Analytical Methods In Value-at-Risk: The New Benchmark for Managing Financial Risk, 3rd Edition, (New York: McGraw-Hill, 2007). |