What is 'Value At Risk  VaR'
Value at risk (VaR) is a statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over a specific time frame. Value at risk is used by risk managers in order to measure and control the level of risk which the firm undertakes. The risk manager's job is to ensure that risks are not taken beyond the level at which the firm can absorb the losses of a probable worst outcome.
BREAKING DOWN 'Value At Risk  VaR'
Value at Risk is measured in three variables: the amount of potential loss, the probability of that amount of loss, and the time frame. For example, a financial firm may determine that it has a 5% one month value at risk of $100 million. This means that there is a 5% chance that the firm could lose more than $100 million in any given month. Therefore, once every 20 months a loss of $100 million or more should be expected.

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What are some common measures of risk used in risk management?
Learn about common risk measures used in risk management and how to use common risk management techniques to assess the risk ... Read Answer >> 
What's the difference between EaR, Value at Risk (VaR), and EVE?
Learn about earnings at risk, value at risk and economic value added, how these risk measures are used, and the difference ... Read Answer >> 
What is backtesting in Value at Risk (VaR)?
Learn about the value at risk of a portfolio and how backtesting is used to measure the accuracy of value at risk calculations. Read Answer >> 
What is a "linear" exposure in Value at Risk (VaR) calculation?
Learn how the valueatrisk (VaR) calculation is used for portfolios with linear risk as opposed to nonlinear risk, and understand ... Read Answer >> 
What does Value at Risk (VaR) say about the "tail" of the loss distribution?
Learn about value at risk and conditional value at risk and how both models interpret the tail ends of an investment portfolio's ... Read Answer >> 
What do regulators think of Value at Risk (VaR)?
Read about the history of value at risk metrics, and learn how regulatory agencies played a role in their promotion and how ... Read Answer >>