Just to add, how i think of it: Incremental VaR is the exact (fully simulated) answer to the change in VaR resulting from removal of the position. Marginal VaR, as a partial derivative, informs an linear approximation to removal--or just a change--in the position; i.e., marginal VaR gives us Component VaR which is an approximation. Marginal VaR is the convenience approximation; incremental VaR is an actual answer. A weak analogy would be: using duration to approximate a price change in bond; duration is the linear approximation (analogous to marginal VaR), whereas re-pricing would give us the accurate, exact answer (analogous to incremental VaR). Thanks,
Dear David,@Srilakshmi yes, exactly. That's why this table in Q60 cannot be correct. The marginal VaR of HIJ is informed by β(HIJ, Portfolio) such that, while the β(HIJ) + β(KLM) <> 1.0, it nevertheless should show portfolio beta of 1.0 to reflect that all three betas are with respect to the portfolio.