Value At Risk Advantages: Why Use VAR in Risk Management
This page will discuss the strengths and advantages of Value at Risk (VAR) in risk management. Make sure you also understand the limitations and disadvantages of VAR. **Value At Risk interpretation.** Value At Risk is a number, measured in price units or as percentage of portfolio value, which tells you that in a defined large percentage of cases (usually 95% or 99%) your portfolio is likely to not [more ...]
Value At Risk (VAR) Limitations and Disadvantages
Value At Risk is a widely used risk management tool, popular especially with banks and big financial institutions. There are valid reasons for its popularity - using VAR has several advantages. But for using Value At Risk for effective risk management without unwillingly encouraging a future financial disaster, it is crucial to know the limitations of Value At Risk. **False sense of security.** Looking [more ...]