Value at Risk Calculator (VaR)

Name: Value at Risk Calculator (VaR)
Author: Laxman Kumawat

Estimate parametric value at risk from portfolio value, volatility, confidence level, and horizon.

Last Updated: May 2026

Risk

Inputs

Portfolio value

Expected annual return

Annual volatility

Confidence level

Horizon in days

Value at Risk

$56,201.51

VaR as % of Portfolio

5.62%

Z-Score

1.645

Trading-Day Horizon

Calculation Details

Item	Value
Portfolio value	$1,000,000.00
Confidence level	95.00%
Annual volatility	18.00%

Investment Planning Notice

Results support education and scenario analysis. They do not provide personalized investment, tax, accounting, or legal advice.

Reviewed For Methodology, Labels, And Sources

Every CalculatorWallah calculator is published with visible update labeling, linked source references, and review of formula clarity on trust-sensitive topics. Use results as planning support, then verify institution-, policy-, or jurisdiction-specific rules where they apply.

Reviewed By

Laxman Kumawat, Finance & Engineering Calculator Owner, reviews methodology, labels, assumptions, and trust-sensitive publishing decisions for this topic area.

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Topic Ownership

Financial calculators, Engineering calculators, Electrical and HVAC planning calculators, Investment, salary, loan, and technical design-estimate workflows

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Methodology & Updates

Page updated May 2026. Finance and engineering calculators are reviewed when formulas, rate assumptions, or technical references change, and during broader category refreshes.

Sources & methodology About the review process

How to Use the Value at Risk Calculator (VaR)

Step 1: Set Portfolio value
Start with portfolio value such as $1000000 so the var calculation has the correct base.
Step 2: Complete the scenario inputs
Add expected annual return, annual volatility, confidence level, and horizon in days using the same period and quote convention as your source data.
Step 3: Review VaR
Read the var result first, then check the supporting values to confirm the formula used the expected inputs.
Step 4: Compare against a benchmark
Compare the result with a benchmark portfolio, peer manager, risk-free rate, or the same strategy over another period.

How This Value at Risk Calculator (VaR) Works

Value at Risk Calculator (VaR) applies Portfolio value × (z × volatility × √time - expected return × time) to the values entered in the form. Percentage inputs are converted to decimals during calculation, while currency, count, and list inputs keep their displayed units.

Risk metrics require consistent return periods and matching risk measures. Annual returns should be paired with annual volatility or tracking error. The result should be read with the example inputs and formula reference below so the metric is tied to the exact scenario being modeled.

What You Need to Know

Worked Example Setup

The default setup follows the page scenario: Estimate parametric value at risk from portfolio value, volatility, confidence level, and horizon. Start with these values to check the formula, then replace each input with your own source data.

Input	Example value	How to treat it
Portfolio value	$1000000	Use the portfolio value from the same scenario as the other inputs.
Expected annual return	7%	Use the expected annual return from the same scenario as the other inputs.
Annual volatility	18%	Use the annual volatility from the same scenario as the other inputs.
Confidence level	95%	Use the confidence level from the same scenario as the other inputs.
Horizon in days	10	Use the horizon in days from the same scenario as the other inputs.

Formula Reference

Metric	Formula	Use
VaR	Portfolio value × (z × volatility × √time - expected return × time)	Normal approximation

Formula Terms Explained

The formula is only useful when each term comes from the same scenario. The table below maps the fields in the calculator to the values used in the worked example.

Formula term	Example value	How the calculator uses it
Portfolio value	$1000000	Used directly as the portfolio value term in the scenario.
Expected annual return	7%	Converted from a percentage to a decimal before the formula is applied.
Annual volatility	18%	Converted from a percentage to a decimal before the formula is applied.
Confidence level	95%	Converted from a percentage to a decimal before the formula is applied.
Horizon in days	10	Used directly as the horizon in days term in the scenario.

Worked Example Walkthrough

Step	Example detail
1. Start with the example inputs	Portfolio value: $1000000; Expected annual return: 7%; Annual volatility: 18%; Confidence level: 95%; Horizon in days: 10
2. Normalize the inputs	Expected annual return 7%; Annual volatility 18%; Confidence level 95% are treated as percentages and converted to decimals.
3. Preserve list order	No ordered cash-flow or value list is needed for this formula.
4. Apply the formula	VaR = Portfolio value × (z × volatility × √time - expected return × time)
5. Interpret the output	Read the var result with the supporting rows from the calculator widget before comparing it with a benchmark.

When to Use Value at Risk Calculator (VaR)

Use case	How it helps
Portfolio review	Check whether return compensated for the risk taken.
Manager comparison	Compare active return, beta exposure, or downside risk across strategies.
Loss planning	Estimate drawdown or value-at-risk context before sizing a position.

Interpreting VaR

The output evaluates return after adjusting for volatility, downside risk, benchmark behavior, beta, or potential loss.

A better risk-adjusted result means the return was more efficient for the type of risk measured, not that the strategy is risk-free.

Compare the result with a benchmark portfolio, peer manager, risk-free rate, or the same strategy over another period. Risk ratios can be distorted by short histories, stale prices, non-normal returns, or one unusually strong period.

Common Mistakes

Mistake	Why it matters
Mixed time bases	Monthly volatility and annual return must be converted before comparison.
Overreading one ratio	Sharpe, Sortino, Treynor, and information ratio measure different risks.
Ignoring tail behavior	Normal approximations can understate rare losses.

Before You Use the Result

Review point	What to confirm
Same-period inputs	VaR is easier to trust when every input uses the same time period, currency, and quote convention.
Benchmark selected	Compare the result with a benchmark portfolio, peer manager, risk-free rate, or the same strategy over another period.
Risk and cost review	Check taxes, fees, liquidity, downside risk, and data quality before treating the output as an investment decision.
Known limitation	Risk ratios can be distorted by short histories, stale prices, non-normal returns, or one unusually strong period.

Keep the research moving with Sharpe Ratio Calculator, Sortino Ratio Calculator, Treynor Ratio Calculator, and Information Ratio Calculator.

Frequently Asked Questions

VaR uses Portfolio value × (z × volatility × √time - expected return × time). Risk metrics require consistent return periods and matching risk measures. Annual returns should be paired with annual volatility or tracking error.

Value at Risk Calculator (VaR) uses portfolio value, expected annual return, annual volatility, confidence level, and horizon in days. Keep those inputs on the same time basis and quote convention before reading the result.

The output evaluates return after adjusting for volatility, downside risk, benchmark behavior, beta, or potential loss. A better risk-adjusted result means the return was more efficient for the type of risk measured, not that the strategy is risk-free.

Treat the output as decision support. Real investment choices should also account for taxes, liquidity, risk, timing, fees, and professional advice where appropriate.

Compare the result with a benchmark portfolio, peer manager, risk-free rate, or the same strategy over another period.

Risk ratios can be distorted by short histories, stale prices, non-normal returns, or one unusually strong period.