Estimate the loss that will not be exceeded at a chosen confidence level over a horizon.
Volatility scales with the square root of time, so a ten-day risk is not ten times a one-day risk. VaR states the loss that will not be exceeded at the chosen confidence, but says nothing about how bad the tail beyond it is. VaR is a threshold rather than a worst case, which is why it should always be read alongside expected shortfall.
Value at Risk
VaR = portfolio × (z × volatility × √(days ÷ 252) − expected return over the horizon)
VaR = portfolio × (z × volatility × √(days ÷ 252) − expected return over the horizon) Volatility scales with the square root of time, so a ten-day risk is not ten times a one-day risk. VaR states the loss that will not be exceeded at the chosen confidence, but says nothing about how bad the tail beyond it is.
VaR is a threshold rather than a worst case, which is why it should always be read alongside expected shortfall.
This calculator takes 5 inputs: Portfolio value, Annual volatility, Expected annual return, Horizon, Confidence level. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.