**Value at risk (VAR), **

### Definition of Value at risk (VAR):

Value at risk (VaR) is a statistic that measures and quantifies the level of financial risk within a firm, portfolio or position over a specific time frame. This metric is most commonly used by investment and commercial banks to determine the extent and occurrence ratio of potential losses in their institutional portfolios.

Largest loss likely to be suffered on a portfolio position over a holding period (usually 1 to 10 days) with a given probability (confidence level). VAR is a measure of market risk, and is equal to one standard deviation of the distribution of possible returns on a portfolio of positions.

Risk managers use VaR to measure and control the level of risk exposure. One can apply VaR calculations to specific positions or whole portfolios or to measure firm-wide risk exposure.

### How to use Value at risk (VAR) in a sentence?

- Value at risk (VaR) is a statistic that measures and quantifies the level of financial risk within a firm, portfolio or position over a specific time frame.
- Investment banks commonly apply VaR modeling to firm-wide risk due to the potential for independent trading desks to unintentionally expose the firm to highly correlated assets.
- The value at risk was quite large but we had decided to leverage our firm for the unlimited upside potential.
- By utilizing a holding company with no actual assets, your value at risk will be negligible; your stress as your portfolio plummets, however, wont be.
- You need to understand how to break down the value at risk to see if it really is worth taking a chance on.
- This metric is most commonly used by investment and commercial banks to determine the extent and occurrence ratio of potential losses in their institutional portfolios.

Meaning of Value at risk (VAR) & Value at risk (VAR) Definition