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.
This video is developed by David from Bionic Turtle.
Unlock full access to Finance Train and see the entire library of member-only content and resources.