Var model mainly evaluates the risk of securities trading by calculating the expected loss and guarantee level. Expected loss refers to the possible loss caused by market price fluctuation in a certain period of time. The level of security refers to the biggest loss that the stock exchange bears in a specific period. Through this model, we can know the profit and loss of the portfolio in time and manage the risk effectively.
In practice, var model can not only help banks and insurance companies control risks, but also be applied to other fields. For example, in the field of international trade, var model can effectively manage the company's cash flow, thus improving the operational efficiency and effectiveness. At the same time, it can also help personal finance. Investors can predict investment risks through the var model, and then make appropriate investment plans.