If a portfolio is doubled in size, keeping its portfolio structure (holdings proportions) the same as before, the VaR will
A) Remain the same.
B) Double.
C) Increase but be less than double its previous value.
D) More than double.

Question

If a portfolio is doubled in size, keeping its portfolio structure (holdings proportions) the same as before, the VaR will 
A) Remain the same.
B) Double.
C) Increase but be less than double its previous value.
D) More than double.

Quizplus · Accepted Answer

VaR is a function of the portfolio size and the holdings proportions. Doubling the portfolio size while keeping the same holdings proportions will lead to a proportional increase in VaR. Therefore, the VaR will double as well.

If a Portfolio Is Doubled in Size, Keeping Its Portfolio