DEFINITION of 'Marginal VaR'
The additional amount of risk that a new investment position adds to a portfolio. Marginal VaR (value at risk) allows risk managers to study the effects of adding or subtracting positions from an investment portfolio. Since value at risk is affected by the correlation of investment positions, it is not enough to consider an individual investment's VaR level in isolation. Rather, it must be compared with the total portfolio to determine what contribution is makes to the portfolio's VaR amount.
INVESTOPEDIA EXPLAINS 'Marginal VaR'
An investment may have a high VaR individually, but if it is negatively correlated to the portfolio, it may contribute a much lower amount of VaR to the portfolio than its individual VaR. For example, consider a portfolio with only two investments. Investment X has a value at risk of $500 and investment Y has a value at risk of $500. Depending on the correlation of investments X and Y, putting both investments together as a portfolio might result in a portfolio value at risk of only $750. This means that the marginal value at risk of adding either investment to the portfolio was $250.

Conditional Value At Risk  CVaR
A risk assessment technique often used to reduce the probability ... 
Model Risk
A type of risk that occurs when a financial model used to measure ... 
Volatility
1. A statistical measure of the dispersion of returns for a given ... 
Risk
The chance that an investment's actual return will be different ... 
Value At Risk  VaR
A statistical technique used to measure and quantify the level ... 
Altman ZScore
The output of a creditstrength test that gauges a publicly traded ...

What is the difference between earnings and income?
The differences between earnings and income change depending on the context. Technically speaking, personal earnings are ... Read Full Answer >> 
What is the formula for calculating beta?
Beta is a measure used in fundamental analysis to determine the volatility of an asset or portfolio in relation to the overall ... Read Full Answer >> 
How can I use a regression to see the correlation between prices and interest rates?
In statistics, regression analysis is a widely used technique to uncover relationships among variables and determine whether ... Read Full Answer >> 
What is the difference between payment netting and closeout netting?
Both payment netting and closeout netting are methods of settlement between two or more parties, used to reduce risk exposure. ... Read Full Answer >> 
What is the minimum capital adequacy ratio that must be attained under Basel III?
Under Basel III, the minimum capital adequacy ratio that banks must maintain is 8%. The capital adequacy ratio measures a ... Read Full Answer >> 
What industries typically use delta hedging techniques?
Those industries which are connected to the finance and commodity markets and are trading derivatives are the most likely ... Read Full Answer >>

Fundamental Analysis
Quantitative Analysis Of Hedge Funds
Hedge fund analysis requires more than just the metrics used to analyze mutual funds. 
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". 
Mutual Funds & ETFs
Analyzing Mutual Funds For Maximum Return
Using a few simple metrics will help you pick the right fund for your portfolio. 
Fundamental Analysis
Explaining the Monte Carlo Simulation
Monte Carlo simulation is an analysis done by running a number of different variables through a model in order to determine the different outcomes. 
Fundamental Analysis
Understanding Modern Portfolio Theory
Modern portfolio theory describes ways of diversifying assets in a portfolio in order to maximize the expected return given the owner’s risk tolerance. 
Investing Basics
Explaining Idiosyncratic Risk
Idiosyncratic risk is the risk inherent in a particular investment due to the unique characteristics of that investment. 
Professionals
Worried About Stocks? Try on Convertibles
Convertibles are a good hedge against equity market risk (if you're o.k. with losing a bit of upside potential). 
Entrepreneurship
Fed Raising Rates Affects Startup Funding
With interest rates having nowhere else to go but up, the Fed’s impending interest rate raise will likely begin to reverse the flow of startup funding.