Understanding Value at Risk (VaR) is crucial for managing financial risk effectively. VaR measures the potential loss in value of a portfolio over a defined period for a given confidence interval.

Consider the following scenario: You have calculated the 1-day 95% VaR to be USD 2.055 million. Now, compare this to the rebalanced 10-day 99% VaR, which amounts to USD 9.089 million. How do these figures compare, and what is the increase in VaR when you subtract the 1-day 95% VaR from the 10-day 99% VaR? The difference is calculated as follows: USD 9.089 million (10-day 99% VaR) - USD 2.055 million (1-day 95% VaR), resulting in an increase of USD 7.034 million.

How significant is this increase in VaR, and what does it indicate about the impact of increasing the time horizon and confidence level on the VaR calculation?