Value At Risk Calculator

There are a few pros and cons to using Value at Risk calculation in risk measurement. The model is developed to work this way because the probabilities in VaR are based on a normal distribution of returns. But, we need to have in mind that financial markets are known to have extreme outlier events on a regular basis— far more than a would predict.

Finally, the VaR calculation requires several statistical measurements such as variance, covariance, and standard deviation. With a two-asset simple portfolio, this is relatively straightforward, but the complexity increases exponentially for a highly diversified portfolio with many instruments.