Value-at-Risk: lets explore what it really means

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Mar 5th 2019 < 1 minute read

Advisers need to be able to assess portfolios and fund risks for their clients. Market risk is often seen as variability in returns, or volatility, although this has limitations. Value-at-Risk (VaR) addresses losses but needs to be correctly understood to appreciate its strengths and weaknesses. VaR relates to uncertainties in returns, probabilities, magnitudes of adverse outcomes and relationships between assets.

In this article, Quintin Rayer gives a short introduction to Value-at-Risk, including its definition, a typical VaR statement, how it is calculated, and the different approaches used.

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Q G Rayer (2019), Exploring Value-at-Risk, DISCUS, available at http://discus.org.uk/exploring-value-at-risk/, 4 pages, 28 February 2019.

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Quintin Rayer

Quintin Rayner has worked for actuarial and investment consultancy firms as well as a multi-national European bank for nearly ten years including wide experience in quantitative fund and risk analysis. He is a Fellow of the Institute of Physics, a Chartered Fellow of the Chartered Institute for Securities and Investments and a Chartered Wealth Manager. Quintin has completed the Sustainable Investment Professional Certification (SIPC) becoming this programme’s second graduate in the UK.