VaR Calculator (Value at Risk)
Calculate potential volatility probability for the next N hours/days instantly.
1 Lot = 100,000 Units (Standard Forex)
What is Value at Risk (VaR)?
Value at Risk (VaR) is a statistic that quantifies the extent of possible financial losses within a firm, portfolio, or position over a specific time frame. This metric is most commonly used by investment and commercial banks to determine the extent and occurrence ratio of potential losses in their institutional portfolios.
Why VaR Matters
It provides a single number to summarize portfolio risk, making it easier to communicate risk levels to stakeholders and adjust positions accordingly.
Who needs this tool?
- Risk Managers: To determine the maximum potential loss.
- Quantitative Traders: To adjust position sizing based on volatility.
- Portfolio Managers: To ensure portfolio risk stays within limits.
Common Misconceptions
- Ignoring 'Tail Risk': VaR only covers X% confidence, not the black swan events.
- Assuming History Repeats: Past volatility doesn't always predict future volatility.
- Confusing Daily VaR with Monthly VaR: Timeframe matters significantly.