Risk

Value At Risk
(VAR)
Gourab Biswas
 1

Definition
Value at Risk is like a tool that
helps us figure out how much
money we might lose in a certain
period and how sure we are about
that estimate. Let’s say 5%
chances of loosing $100 of our
investments.
 2

Importance
Knowing about VaR (Value at
Risk) is really important for
businesses and investors. It
helps them make smart
choices and deal with risks in a
way that suits their objectives.
 3

Components of
VaR
A. Market risk

B. Credit risk

C. Operational risk
 4

Interpreting VaR
VaR results often come with a
color code: green, yellow, and
red. Green means you're in the
safe zone, yellow signals
caution, and red screams
danger.
 5

Limitations
of VAR
VaR models may struggle to
predict extreme events, known
as Black Swan events, leading
to potential underestimation of
risks. Also lack of data can be
a potential limitation.
 6

Real-Life
Application
Company X, without VaR, faced
unexpected losses. After using
VaR, suddenly, they can
anticipate and mitigate risks
effectively. But black swan
events are an exception.
 Thank you
Gourab Biswas
linkedin.com/in/gourab-biswas-98-gb

Was this
helpful?
Ask any questions in the comments.
Like, share and save for later