Given two portfolios $P _ { 1 }$ and $P _ { 2 }$ ,which risk measure $R ( )$ does not always satisfy the "sub-addivity" property (i.e. ,that $R \left( P _ { 1 } + P _ { 2 } \right) \leq R \left( P _ { 1 } \right) + R \left( P _ { 2 } \right)$ where $R (. )$ is the measure of portfolio risk)?
A)VaR.
B)Expected shortfall.
C)Variance.
D)Standard deviation.

Question

Quizplus · Accepted Answer

VaR (Value at Risk) does not always satisfy the sub-additivity property, meaning that the risk of a combined portfolio can be greater than the sum of the risks of the individual portfolios. This is because VaR does not fully account for the distribution of losses beyond a certain threshold.

Given Two Portfolios P1P _ { 1 }P1​ And P2P _ { 2 }P2​

Given Two Portfolios $P _ { 1 }$ And $P _ { 2 }$