Value at Risk (VaR) Calculator
Calculate the potential maximum loss of your investment portfolio using RiskMetrics methodology
Calculate Portfolio Value at Risk
Total value of your investment portfolio
Anticipated annual return percentage
Standard deviation of portfolio returns
Investment time period
Value at Risk Results
Risk Analysis
VaR Comparison Across Confidence Levels
$11,230
11.23% of portfolio
$16,675
16.67% of portfolio
$26,890
26.89% of portfolio
$38,350
38.35% of portfolio
Risk Level Guide
Low Risk
VaR ≤ 10% of portfolio
Conservative approach
Moderate Risk
VaR 10-20% of portfolio
Balanced risk-return
High Risk
VaR 20-30% of portfolio
Aggressive strategy
Very High Risk
VaR > 30% of portfolio
Speculative investments
VaR Tips
Higher confidence levels show more extreme potential losses
VaR assumes normal distribution of returns
Consider stress testing for extreme market conditions
Diversification can help reduce portfolio VaR
Understanding Value at Risk (VaR)
What is Value at Risk?
Value at Risk (VaR) is a statistical measure that quantifies the potential maximum loss of an investment portfolio over a specific time period at a given confidence level. It answers the question: "What is the worst expected loss over a target horizon within a given confidence interval?"
Why is VaR Important?
- •Risk quantification and comparison across portfolios
- •Regulatory compliance for financial institutions
- •Portfolio optimization and capital allocation
- •Risk management and position sizing decisions
RiskMetrics Formula
VaR = |Expected Return - (Z-score × √Time × Volatility)| × Portfolio Value
- Expected Return: Anticipated portfolio return (annualized %)
- Z-score: Statistical value corresponding to confidence level
- Volatility: Standard deviation of portfolio returns (annualized %)
- Time: Investment horizon (years)
- Portfolio Value: Total market value of investments ($)
Note: VaR assumes normal distribution of returns and may underestimate risk during extreme market conditions or black swan events.