What Is Value At Risk (VAR)?
Value-at-Risk oris a financial technique developed in the late 90s by . It is used to estimate the total possible loss for a day's activity within a financial firm. is calculated using historical data on risk, volatility and price movements.
The problem is that it ignores the extremes (assuming the performance has a normal distribution) and these tail-risks are the ones that can bankrupt an institution very quickly. For general day-to-day activities however,is quite useful and accurate.
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