Enterprise Risk Management Slides

Correlation, co-dependency and risk aggregation [5]

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Bullet points include: We have: So, if exposure loss is uncorrelated with total portfolio loss (i.e. Correlation is here zero), then Marginal VaR equals the expected loss on the exposure. Here correlation term is correlation between series relating outcomes for i’th asset in isolation versus series relating to weighted average outcomes

Bullet points include: We have: So, if exposure loss is uncorrelated with total portfolio loss (i.e. Correlation is here zero), then Marginal VaR equals the expected loss on the exposure. Here correlation term is correlation between series relating outcomes for i’th asset in isolation versus series relating to weighted average outcomes

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