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VaR Decomposition
Suppose an investor in country A bought N unit of asset in country B at rate S in local currency. Therefore it's investment in country B is N*S*E where E is the exchange rate. Now I calculated 1 day VaR for this investment. Now I want to see what percentage of this VaR is due to asset and what percentage is due to exchange rate i.e. I want to decompose it in two dimension. Can anyone give any idea how to do that?Thanks
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- JoeyDVivre
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VaR Decomposition
Is there something wrong with just using incremental VaR like in the RiskMetrics book?
VaR Decomposition
Basic idea is same, in RiskMetrics, they differentiate portfolio var expressed in currency like USD w.r.t. weight vector [in same unit i.e. USD]. But in my problem, how I differentiate the portfolio VaR, that I calculated?