⚠️ Value at Risk Calculator (VaR)
Estimate the maximum expected loss on a portfolio over a given time period at a chosen confidence level, using the parametric (variance-covariance) method.
What is Value at Risk (VaR)?
Value at Risk (VaR) estimates the maximum loss a portfolio is expected to experience over a set time period at a given confidence level, under normal market conditions. For example, a 95% one-day VaR of $5,000 suggests there’s roughly a 5% chance of losing more than $5,000 in a single day.
The formula
This calculator uses the parametric (variance-covariance) method: VaR% = (z-score for confidence level × volatility over the horizon) – expected return over the horizon, scaled to the chosen time horizon using the square root of time rule, then multiplied by portfolio value.
- z-score: 1.282 for 90%, 1.645 for 95%, 2.326 for 99% confidence
This tool is for general educational purposes. Parametric VaR assumes normally distributed returns, which real markets don’t always follow, especially during extreme events, so treat results as an estimate, not a guarantee.