Why coherent risk measures matter: VaR fails subadditivity and hurts diversification
_onionesque · x · 2026-10-29
onionesque highlights the idea of coherent risk measures—those satisfying four axioms (translation invariance, subadditivity, positive homogeneity, monotonicity)—which yield several desirable properties. In a follow-up he notes Value-at-Risk (VaR) is not coherent due to lacking subadditivity, a real problem for risk management since it can actively discourage diversification.
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