What does 95 VaR mean

Takeaway value at risk is like driving on empty…This single number summarizes the portfolio's exposure to market risk as well as the probability of an adverse move.That is var in a nutshell.Var can be calculated using different techniques.If we invest $100, we.

If the 95% var is, say, $2 million, we would expect to lose not more than $2 million.Value at risk (var) is a financial metric that estimates the risk of an investment.Z is the critical value.Probability it is impossible to have 100% accuracy when it comes to making predictions about the future.Value at risk (var) calculation details.

Informally, a loss of $1 million or more on this portfolio is expected on 1 day out of 20 days (because of 5% probability).How can i use var?For example, if a security has a 5% daily var (all) of 4%:Historical simulation (hs) is the simplest approach to estimate var by means of ordered loss observations.