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Value at Risk (VaR) Calculator

Estimate the maximum potential financial loss of an investment portfolio over a specific time horizon.

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Calculation Parameters

Specify your inputs below.

Calculated Result

Z-Score Value 1.645
Value at Risk (VaR) $24,675.00
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Expert Tip

Value at Risk models the maximum expected loss over a specific period at the chosen confidence level.

How this Calculator Works

This calculator estimates Value at Risk (VaR) using the variance-covariance method. It determines the maximum dollar amount or percentage expected to be lost within a portfolio over a given period at a designated confidence level (e.g. 95% or 99%). Risk managers use it to monitor downside exposure limits.

Formula & Methodology

VaR = Portfolio Value * (Z-Score * Portfolio Volatility * Sqrt(Time Horizon)) - Portfolio Value is the total capital value of the assets. - Z-Score is the multiplier representing the statistical confidence level (e.g. 1.645 for 95%, 2.326 for 99%). - Portfolio Volatility is the standard deviation of returns. - Time Horizon is the duration measured in days or years.

Step-by-Step Calculation Example

Here is a step-by-step example showing how the calculations are performed:

A portfolio is worth $1,000,000, with a daily volatility of 1.5%. Calculate the 1-day VaR at a 95% confidence level (Z-Score = 1.645). 1. Multiply volatility by Z-Score: 0.015 * 1.645 = 0.024675. 2. Multiply by the portfolio value: $1,000,000 * 0.024675 = $24,675. Result: The 1-day Value at Risk (VaR) at a 95% confidence level is $24,675.

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Detailed Insights & Expert Guide

ℹ️ About this Calculation

This investment analytics calculator evaluates portfolio yield, compounding growth, risk-adjusted returns, present/future asset valuations, and capital growth metrics based on CFA and modern portfolio theory (MPT) principles.

Variable Glossary

Input

Investment Parameters

Initial principal, periodic contribution, interest rate, discount factor, holding period, or asset price inputs.

Parameter

Performance Metrics

Compound Annual Growth Rate (CAGR %), Net Present Value (NPV), Internal Rate of Return (IRR), or Sharpe ratio.

How to Calculate Step-by-Step

1

Step 1

Enter your initial investment capital, asset purchase prices, or cash flow streams.

2

Step 2

Set compounding frequency, discount rate, or benchmark risk-free rate factors.

3

Step 3

Review calculated total return value, annualized growth %, or risk-adjusted alpha/beta statistics.

FAQ

How does compounding frequency impact investment returns?
More frequent compounding (e.g. monthly or daily vs. annually) generates higher effective annual yields (APY) because interest is calculated on accumulated interest earlier in the period.
What is the difference between Sharpe Ratio and Sortino Ratio?
The Sharpe ratio divides excess return by total standard deviation (both upside and downside volatility), whereas the Sortino ratio divides excess return by downside deviation only.
Should investment calculators replace professional wealth management?
No. Investment calculators model financial mathematics under assumed growth rates. Actual market performance fluctuates, so consult a licensed financial planner (CFP) or RIA for personalized advice.