Definitions for "Value At Risk"
VAR. A technique which uses the statistical analysis of historical market trends...
Measures risk in terms of potential financial losses on the current portfolio. It can be interpreted as the worst-case scenario an investor can expect to incur on his or her portfolio within a given timeframe and confidence interval.
The amount or percentage of value that is at risk of being lost from a change in prevailing interest rates (similarly defined for things other than interest rates as well). The sensitivity of the value of a single financial instrument, a portfolio of financial instruments, or an entire entity's balance sheet to changes in interest rates can be calculated. The resulting sensitivity is the amount of value at risk. See earnings at risk for an alternative measure of interest rate risk. VAR, sometimes called equity value at risk or EVAR, can be calculated by at least four different mathematical expresions. The simplest and least accurate measure of VAR is the difference between the calculated economic value of equity (EVE) under one projected rate scenario and the calculated EVE under a different projected rate scenario. See correlation VAR, empirical VAR, and historical VAR for definitions of VAR calculated under more rigorous formulae.