A value at risk (VaR) that represents the sum of individual components’ VaRs of a portfolio. As opposed to diversified VaR, this measure of risk does not take into account the portfolio effect (diversification).

It assumes that adding more components to a portfolio does not lower the risk of the portfolio. When calculating the undiversified VaR, the portfolio’s risk (volatility) is simply the weighted average of the individual standard deviations of its components (e.g., securities).