We study analytic Value–at–Risk (VaR) and its decomposition for portfolios whose profit and loss is a quadratic (delta–gamma) function of jointly Gaussian risk–factor changes,ΔP = δ⊤Δx + Δx⊤ΓΔx with Δx ∼ N(0,Σ). Any risk functional positively homogeneous of degree one in the sensitivity pair (δ,Γ) is Euler–additive across the deltas and the ordered gamma pairs, cross–gammas included, and we compare four allocations on this common footing. Within the quadratic–Gaussian model the exact VaR allocation consists of conditional moments of the factors given the loss, and the exact Expected Shortfall allocation of tail conditional moments, both computed by one–dimensional Fourier inversion. The saddlepoint allocation is exactly additive because the Lugannani–Rice quantile is scale–equivariant. The fourth–order Cornish–Fisher allocation reduces to trace and matrix expressions evaluable in O(n3) arithmetic, and near a linear book its quantile agrees with the exact quantile to second order in the convexity, which requires the squared–skewness term. Frozen–multiplier schemes, which scale variance shares by one portfolio multiplier, are additive but omit the marginal skewness and kurtosis terms; these form a zero–sum redistribution. Using the trace–square gradient tr(ΓΣ)Σ in place of ΣΓΣ breaks additivity by a closed–form amount, diagonal gamma matrices included. Finally, a moment constraint on the exact marginals detects allocations that add up correctly yet give hedge signals of the wrong sign.
| Repository name | URI |
|---|---|
| Reproducible Research Repository (World Bank) | https://reproducibility.worldbank.org |
Paper exhibits were reproduced on a computer with the following specifications:
• OS: Windows 11 Enterprise
• Processor: Intel(R) Xeon(R) Gold 5218 CPU @ 2.30GHz (2.30 GHz) (2 processors)
• Memory available: 16.0 GB
Run time: ~3 minutes.
To reproduce the findings in the paper, restore the environment in requirements.txt and execute the python script "main".
The package does not rely on external data. All inputs are defined in the code using parameters and formulas printed in the paper (Section 10.2, Examples 1 and 2, Section 7.4 and Appendix H).
| Author | Affiliation | |
|---|---|---|
| Michal Certik | World Bank | mcertik@worldbank.org |
2026-10-20
| Location | Code |
|---|---|
| World | WLD |
The materials in the reproducibility packages are distributed as they were prepared by the staff of the International Bank for Reconstruction and Development/The World Bank. The findings, interpretations, and conclusions expressed in this event do not necessarily reflect the views of the World Bank, the Executive Directors of the World Bank, or the governments they represent. The World Bank does not guarantee the accuracy of the materials included in the reproducibility package.
| Name | URI |
|---|---|
| MIT License | https://opensource.org/license/mit |
| World Bank IGO Rider | https://github.com/worldbank/metadata-editor/blob/main/WB-IGO-RIDER.md |
| Name | Affiliation | |
|---|---|---|
| Michal Certik | The World Bank Group | mcertik@worldbank.org |
| Reproducibility WBG | World Bank | reproducibility@worldbank.org |
| Name | Abbreviation | Affiliation | Role |
|---|---|---|---|
| Reproducibility WBG | DECDI | World Bank - Development Impact Department | Verification and preparation of metadata |
2026-10-20
1