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.
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