Value at Risk (VaR) is a risk quantification tool and is the world-wide standard in effective risk measurement. In simple words, In the worst case, how much do I stand to lose, tomorrow?
Definition of VaR Value at Risk is defined as the expected maximum loss due to unfavorable movement of the underlying market factors that a portfolio may incur over a target time horizon (T) within a given degree of certainty / confidence level selected by the decision maker (generally taken as 95%). A Portfolio VaR calculated for 1 day holding period with 95% confidence interval is the maximum expected loss that one might make in 95 out of 100 trading sessions.
