Value at Risk (VaR)
Maximum expected loss at a confidence level
What is Value at Risk (VaR)?
Value at Risk (VaR) A statistical measure estimating the maximum potential loss of a portfolio over a given time period at a specified confidence level. For example, a 1-day 95% VaR of $10,000 means there is a 5% chance of losing more than $10,000 in a single day. VaR helps options traders size positions and understand portfolio-level risk.
Complete Definition
A statistical measure estimating the maximum potential loss of a portfolio over a given time period at a specified confidence level. For example, a 1-day 95% VaR of $10,000 means there is a 5% chance of losing more than $10,000 in a single day. VaR helps options traders size positions and understand portfolio-level risk.
Example
Your portfolio has a 1-day 95% VaR of $5,000, meaning 95% of the time your daily loss will not exceed $5,000.
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