DEFINITION of 'Incremental Value At Risk'
The amount of uncertainty added to or subtracted from a portfolio by purchasing a new investment or selling an existing investment. Investors use incremental VaR to determine whether a particular investment should be undertaken, given its likely impact on potential portfolio losses. The idea of incremental VaR was developed by Kevin Dowd in his 1999 book, "Beyond Value at Risk: The New Science of Risk Management."
INVESTOPEDIA EXPLAINS 'Incremental Value At Risk'
Incremental VaR is based on VaR, which attempts to calculate the likely worstcase scenario for a portfolio as a whole in a given time frame. To calculate incremental VaR, an investor needs to know the portfolio's standard deviation, the portfolio's rate of return and the asset in question's rate of return and portfolio share.
RELATED TERMS

Risk Assessment
The process of determining the likelihood that a specified negative ... 
Barra Risk Factor Analysis
A multifactor model created by Barra Inc., which is used to ... 
Conditional Value At Risk  CVaR
A risk assessment technique often used to reduce the probability ... 
Standard Deviation
1. A measure of the dispersion of a set of data from its mean. ... 
Value At Risk  VaR
A statistical technique used to measure and quantify the level ... 
BackToBack Deductible
An insurance policy deductible that is the same as the coverage ...
Related Articles

Active Trading Fundamentals
Measuring And Managing Investment Risk
Risk is inseparable from return. Learn more about these measures and how to balance them. 
Active Trading Fundamentals
How To Convert Value At Risk To Different Time Periods
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Options & Futures
An Introduction To Value at Risk (VAR)
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Investing Basics
Understanding Risk Averse Investing
Risk averse describes a low level of risk an investor is willing to accept on his investments. An investor who is risk averse prefers little risk and is willing to accept a lower return because ... 
Investing Basics
Are You Investing With A Purpose?
We all appreciate having a wide variety of investing choices, but a random collection of investments does not make an investing plan. 
Active Trading Fundamentals
20 Rules To Trade More Professionally
Break free from the pack and join the professional minority with an approach that raises your odds for long term prosperity. 
Fundamental Analysis
Is Apple's Stock Over Valued Or Undervalued?
Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ... 
Bonds & Fixed Income
Figuring Out How To Cover Your Liability Bases
Whenever we talk about the assetliability approach to portfolio management (ALM), the concepts of immunization and cash flow matching come into play. 
Options & Futures
How to Use Commodity Futures to Hedge
Both producers and consumers of commodities can use futures to hedge. We explain, using a few examples, how to achieve commodity hedging with futures. 
Trading Strategies
You'll Lose Profits Without This Trading Strategy
A trading edge defines your technical or strategic advantage in the highly competitive market environment.