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we cannot interchangeably use these formulas, because: When completely hedged, any change in market would bring about zero change in the Asset position. This is the case with the minimum variance porfolio. However, the question is not related to that Efficient frontier thing. Instead its about...

No worries, your first expression looks like beta between a and b, the second expression appears to be variance of B over variance of entire portfolio. the negative sign before 2, implies opposite positions or negatively correlated positions. Looks like a hedging scenario. It resonates with...

@Nicole Seaman Thank you for sharing, can you please also add a link to the spreadsheet used in the video?

@jchun8523 These are used for analytical methods Its using of variance, covariance matrix concept, in that each asset (is an integrated part of portfolio) has its risk footprint and some correlations with other assets and even portfolio as a whole. These are analytical methods, where you...

@mbbx5va2 Jorion writes it as VAR = - Mu + Sigma*z, please let me know where you see these other two forms that you have mentioned. Just adding a known fact here, its cumulative st normal dist, so its one tailed. I hope it will get clearer now

Hello Jack, please allow me to answer: your calculation, "Marginal VaR B = 0,431-0,380=0,051mln" is actually the incremental VAR. Remember, Marginal is always for a small change (aka additional $ exposure) , where as incremental VAR is the one used for adding a new position. Now for the formula...