Diversified Bond Value at Risk (VaR)

In the previous video, we learned about the calculation of the un-diversified VaR of the two-asset bond portfolio. This video explains Jorion's Table 11-4 which calculates diversified value at risk (VaR) for the same bond portfolio. The key difference is that diversified VaR should be lower to reflect the benefit of imperfect correlations.

https://www.youtube.com/watch?v=cjguDOUswDA

This video is developed by David from Bionic Turtle.

Finance Train Subscription

Unlock full access to Finance Train and see the entire library of member-only content and resources.