Hi Guys,
Wonder if someone could clarify the following question please:
If we want to reduce portfolio VAR by X amount, should we be looking at position Marginal VAR’s or Component VAR’s?
MVAR is the change in portfolio VAR resulting from taking an additional dollar of exposure to a given component while Component VAR tells us how portfolio VAR would change if the component was deleted from the portfolio.
Confused as to what metric to take in this case.
Thanks