Reach active buyers and immediately increase your visibilityGet Started
Companies that provide retirement plan benefits, including 401k plans and pensions. Get information on corporate retirement plans, or how to offer retirement benefits for employees… more »
Value at Risk (VaR) is a way of measuring risk, and is used in financial risk management. It measures the specific risk of loss on a range of financial assets. VaR is based on a portfolio, a probability of an extreme loss occurring, and a time horizon. An example is that a specific portfolio can have a one-day 1% VaR of $2 million, meaning there is a 0.01 probability that the portfolio could fall in value by $2 million in a one day trading period.
Risk management is important for large businesses that maybe affected by sudden changes in the market. Preparing for a loss enables a business to cope with any dramatic events without serious consequences that could affect them otherwise. Financial events in the early 1990s caused severe problems for many companies. J.P.Morgan developed and used VaR extensively to try and avoid these problems happening again. It allows a single number to be reported that can easily be understood by those in charge of a firm, who can then plan for any problems that may arise.
If you need to learn more about Value at Risk (VaR) issues, check out the links on this page, which were compiled and researched by Business.com.