Difference between revisions of "Value at Risk"

Revision as of 14:03, 16 April 2021

Definition

Value at Risk (VaR) is a Risk Measure that aims to capture the downside value risk of a Market Portfolio.

Formula

VaR is a quantile Risk Measure and requires the specification of

An aggregate Portfolio Profit and Loss variable constructed as the sum of potential individual market losses $L=\sum L_{i}$
A Confidence Level $\alpha$

Given a confidence level $\alpha\in(0,1)$ , the VaR of calculated portfolio loss $L$ at the confidence level $\alpha$ is the smallest number $K$ such that the probability that the loss $L$ exceeds $K$ is at least $\alpha$ .

@@ Line 1: / Line 1: @@
 == Definition ==
-'''Value at Risk'''
+'''Value at Risk''' (VaR) is a [[Risk Measure]] that aims to capture the downside [[Economic Value | value]] risk of a Market Portfolio.
-[[Category:Stub]]
+== Formula ==
+VaR is a quantile [[Risk Measure]] and requires the specification of
+* An aggregate Portfolio Profit and Loss variable constructed as the sum of potential individual market losses <math>L=\sum L_{i}</math>
+* A [[Confidence Level]] <math>\alpha</math>
+Given a confidence level <math>\alpha\in(0,1)</math>, the VaR of calculated portfolio loss <math>L</math> at the confidence level <math>\alpha</math> is the smallest number <math>K</math> such that the probability that the loss<math>L</math> exceeds <math>K</math> is at least <math>\alpha</math>.
+== See also ==
+* [[Economic Capital]]
+* [[Expected Shortfall]]
+* [[wikipedia:Value_at_risk | Value at Risk]]
+[[Category:Tail Risk]]
+[[Category:Risk Models]]