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Value at Risk – What is Value at Risk in the financial risk management?

May 25, 2019 by Investor

What is Value at Risk?

Definition of Value at Risk: It is a popular quantitative measure in the financial risk management and financial mathematics to make a charge for the danger of defeat on a certain portfolio of the financial asset. For an offered portfolio, time period and probability, Value At Risk is explained as upper limit or a threshold value that identified the loss in themarket on the portfolio in the given time period, offered the group of probability under normal conditions with no trade in portfolio. It is felt by the critics that the method is confusing and that the suppositions are defective symbols of reality. Value at Risk is utilized in measurement of risk, control of the finance, finance, financial reporting and while calculating the capital needs. The value at risk is generally utilized for assessing the market danger. Market risk is the term that explains the danger that value of investment or portfolio of trading decreases because of the alteration in the cost of certain dangers. Some of the standard market danger factors are interest rates, stock costs, commodity prices and foreign exchange rates. In every case, the danger is explained as an impact of an alteration in the market cost or of indirect volatility in future market.

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