VaR (Value at Risk), also known as value-at-risk model, also known as value-at-risk method and value-at-risk method, is a commonly used method in risk management of financial institutions, which was put forward in 1993.

The maximum possible loss of a financial asset or portfolio under normal market fluctuations. More precisely, it refers to the maximum loss that the value of financial assets or portfolio may suffer in a specific period in the future under a certain probability level (confidence level).

Statistically speaking, VaR itself is a number, which refers to the "value at risk" in the face of "normal" market fluctuations. That is, the expected maximum loss (absolute or relative) within a given confidence level and a certain holding period.

Extended data:

VaR functions mainly include:

First of all, it can simply and clearly express the size of market risk. Investors and managers without any technical color and professional background can judge financial risks through VaR value.

Second, risks can be calculated in advance, unlike previous risk management methods, which all measure risks afterwards.

Third, it cannot only calculate the risk of a single financial instrument. It can also calculate the portfolio risk composed of various financial instruments, which is impossible for traditional financial and insurance management.

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