VALUE AT RISK (VaR)

The value at risk (VaR) measures the risk of loss associated to financial assets. For a given time period (normally ranging from 1 to 10 days), and with a given prob-ability confidence (generally equal to 95% or 99%); this measure represents the maximum loss the investor can suffer when holding financial assets. The time hori-zon used to calculate the VaR depends on the investment duration; the value at risk is used to compute the minimum capital requirements necessary to compensate losses resulting from market risk, according to the BIS banking regulation