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Value at Risk Formula

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Value at Risk (VaR) is a general measure of risk developed to equate risk across products and to aggregate risk on a portfolio basis. Check FAQs

VaR = - μPL + σPL \cdot z α

VaR - Value at Risk?μPL - Mean of Profit and Loss?σPL - Standard Deviation of Profit and Loss?z_α - Standard Normal Variate?

Value at Risk Example

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With units

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Here is how the Value at Risk equation looks like with Values.

Here is how the Value at Risk equation looks like with Units.

Here is how the Value at Risk equation looks like.

27.48 = - 12 + 24 \cdot 1.645

27.48 = - 12 + 24 \cdot 1.645

27.48 = - 12 + 24 \cdot 1.645

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Value at Risk Solution

Follow our step by step solution on how to calculate Value at Risk?

FIRST Step Consider the formula

VaR = - μPL + σPL \cdot z α

Next Step Substitute values of Variables

∴

VaR = - 12 + 24 \cdot 1.645

Next Step Prepare to Evaluate

∴

VaR = - 12 + 24 \cdot 1.645

LAST Step Evaluate

∴

VaR = 27.48

Value at Risk Formula Elements

Variables

Value at Risk

Value at Risk (VaR) is a general measure of risk developed to equate risk across products and to aggregate risk on a portfolio basis.

Symbol: VaR

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Value at Risk

Mean of Profit and Loss

Mean of Profit and Loss is the average of the given numbers and is calculated by dividing the sum of given numbers by the total number of numbers.

Symbol: μPL

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Mean of Profit and Loss

Standard Deviation of Profit and Loss

Standard Deviation of Profit and Loss helps you measure the volatility factor of a fund.

Symbol: σPL

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Standard Deviation of Profit and Loss

Standard Normal Variate

A Standard Normal Variate is a normally distributed random variable with mean μ=0 and standard deviation σ=1.

Symbol: z_α

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Standard Normal Variate

Other formulas in Investment category

Go Portfolio Expected Return

ER p = w 1 \cdot (ER 1) + w 2 \cdot (ER 2)

Go Equivalent Annual Annuity

C f = \frac{r \cdot (NPV)}{1 - {(1 + r)}^{- n}}

Go Portfolio Turnover Rate

PTR = (\frac{TSPS}{ANA}) \cdot 100

Go Average Return on Investment

AR = mod \underset{̲}{u} s \frac{TVR}{TNR}

How to Evaluate Value at Risk?

Value at Risk evaluator uses Value at Risk = -Mean of Profit and Loss+Standard Deviation of Profit and Loss*Standard Normal Variate to evaluate the Value at Risk, The Value at Risk formula is defined as a general measure of risk developed to equate risk across products and to aggregate risk on a portfolio basis. Value at Risk is denoted by VaR symbol.

How to evaluate Value at Risk using this online evaluator? To use this online evaluator for Value at Risk, enter Mean of Profit and Loss (μPL), Standard Deviation of Profit and Loss (σPL) & Standard Normal Variate (z_α) and hit the calculate button.

FAQs on Value at Risk

What is the formula to find Value at Risk?

The formula of Value at Risk is expressed as Value at Risk = -Mean of Profit and Loss+Standard Deviation of Profit and Loss*Standard Normal Variate. Here is an example- 27.48 = -12+24*1.645.

How to calculate Value at Risk?

With Mean of Profit and Loss (μPL), Standard Deviation of Profit and Loss (σPL) & Standard Normal Variate (z_α) we can find Value at Risk using the formula - Value at Risk = -Mean of Profit and Loss+Standard Deviation of Profit and Loss*Standard Normal Variate.

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Value at Risk Formula

Value at Risk Example

Value at Risk Solution

Value at Risk Formula Elements

Other formulas in Investment category

How to Evaluate Value at Risk?

FAQs on Value at Risk

Variable Name