VaR fails the following requirement of a "coherent" risk measure:
A)Linear homogeneity.
B)Monotonicity.
C)Subadditivity.
D)Translation invariance.

Question

Quizplus · Accepted Answer

VaR fails the subadditivity requirement of a "coherent" risk measure. This means that the VaR of a portfolio may not be equal to the sum of the VaRs of its individual positions. Therefore, VaR is not considered a "coherent" risk measure.

VaR Fails the Following Requirement of a "Coherent" Risk Measure