Value at Risk Definition, Operations - Supply Chain Dictionary, MBA

Value at Risk. Definition: Value at Risk. Value at Risk makes an assessment of maximum possible loss under normal market conditions over a given interval of time. It takes into consideration a confidence interval of a normal occurrence. It is usually taken to be 95% which accounts for worst possible losses only during 5% of the time horizon. It can be applied to. A) Individual Assets. B) Portfolio of Assets. Individual Assets : VAR= V(1-e r *) Where r*= z*sigma + u* Example : For an initial investment of Rs 50,000 for one month . Calculate the value at risk for 200 houseolds having u=0.0089 and standard deviation of 0.0718 . The given confidence interval is 95% Var = 50,000( 1- e- r ) r=1.96 * 0.0718 + 0.089 = 0 .22978. VAR = 50,000( 1-e .23 ) = 50,000(1-1.25) Browse the definition and meaning of more terms similar to Value at Risk. The Management Dictionary covers over 7000 business concepts from 6 categories.