What is VaR? Different types of VaR

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Accepted Answer

VaR stands for Value at Risk, a measure used to quantify the level of financial risk within a portfolio.

VaR is a statistical measure used to estimate the potential loss on an investment over a specified time period.
There are different types of VaR including historical VaR, parametric VaR, and Monte Carlo VaR.
Historical VaR uses past data to estimate potential losses, parametric VaR uses statistical models, and Monte Carlo VaR simulates various possible outcomes.
For example, a 95% VaR of $1 million means that there is a 5% chance of losing more than $1 million over a given time period.