VaR Model

Value at Risk (VaR) is a financial metric that estimates the maximum potential loss on an investment or portfolio over a specific time period, given a certain confidence level. For example, a 1-day VaR at 95% confidence might indicate that there’s a 5% chance the portfolio could lose more than a certain amount within one day. It helps investors and institutions assess and manage risk by quantifying the potential downside, enabling better decision-making and capital allocation to withstand adverse market movements.