VaR stands for Value-at-Risk. It’s a hugely important component of any form of trade because it is a straightforward method to quantify the risk of a single asset or entire portfolio at any point in time. Using VaR modelling, we can define the likelihood of losses in a portfolio and use this to create different collections of assets that represent risky and safe sentiment. If we’re feeling bullish on certain economies, we can begin to invest in assets from our risky pool. If you believe the economy is headed towards a downturn, we may look to safer investments. With VaR, we can constantly keep an eye on how the probability of losses and extent of losses dynamically changes as we introduce and remove different assets.
Understanding Value-at-Risk (VaR)
Understanding Value-at-Risk (VaR)
Understanding Value-at-Risk (VaR)
VaR stands for Value-at-Risk. It’s a hugely important component of any form of trade because it is a straightforward method to quantify the risk of a single asset or entire portfolio at any point in time. Using VaR modelling, we can define the likelihood of losses in a portfolio and use this to create different collections of assets that represent risky and safe sentiment. If we’re feeling bullish on certain economies, we can begin to invest in assets from our risky pool. If you believe the economy is headed towards a downturn, we may look to safer investments. With VaR, we can constantly keep an eye on how the probability of losses and extent of losses dynamically changes as we introduce and remove different assets.