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Medium · risk_management · Quant Researcher interview question · component_var, marginal_var, parametric_var, risk_decomposition, risk_management
Component VaR decomposes portfolio risk into each position's marginal contribution, a key technique for risk budgeting and attribution. Under the parametric normal assumption, it provides an analytical solution for risk decomposition without requiring separate simulations. This method is widely used in portfolio management to understand the risk contribution of individual assets, including hedges which can have negative contributions. Task Implement the function component_var(weights, returns,