InsidersTradesSigma
Performance & Risk Metrics
The marginal change in portfolio Value-at-Risk resulting from adding or removing a single position, expressed as the difference between the portfolio VaR with and without that position.
Incremental VaR measures how much the whole portfolio's VaR would change if you added or removed one full position. Where Marginal VaR looks at the effect of a tiny change in a holding, Incremental VaR looks at the discrete effect of the entire trade. It answers a concrete question before you execute: how much tail risk does this specific position add or remove?
The figure can be counter-intuitive: a position that is volatile on its own may carry a small or even negative Incremental VaR if it diversifies the rest of the book, while a seemingly tame position can add a lot of risk if it is correlated with existing holdings. The interaction with the current portfolio, not the position in isolation, drives the number.
Formula