Var: Value at Risk (VaR)

Value at Risk (VaR) estimates the risk of an investment. VaR measures the potential loss that could happen in an investment portfolio over a period of time. Value-at-Risk (VaR) is a statistical measure that quantifies the potential maximum loss an investment portfolio could experience at a certain confidence level over a specified time horizon. VaR is a statistical metric that forecasts the highest possible loss and the probability of it occurring over a period. Learn how to calculate VaR using variance-covariance, Monte Carlo simulation, and historical methods, and see the pros and cons of VaR. Value at risk (VaR) is a measure of the risk of loss of investment/capital. It estimates how much a set of investments might lose (with a given probability), given normal market conditions, in a set time period such as a day.