Marginal Value at Risk

Marginal value at risk, marginal VaR, or mVaR measure how much a position or sub-portfolio contributes to the overall value at risk (VaR) of a portfolio. For a given sub-portfolio, mVaR is calculated as

[mVaR] = [VaR of the existing portfolio] – [VaR of the portfolio without the sub-portfolio]

Whereas incremental VaR indicates the impact of a small change in a position on the overall VaR of the portfolio, mVaR tells us how much removing the entire position would change the overall VaR of the portfolio. As with incremental VaR, mVaR can be positive or negative. In both cases, for incremental VaR and for mVaR, a positive number indicates that the position is adding risk to the portfolio.


Back to glossary index