Value at Risk Calculator (VaR)
Estimate parametric value at risk from portfolio value, volatility, confidence level, and horizon.
Last Updated: May 2026
Risk
Inputs
Value at Risk
$56,201.51
VaR as % of Portfolio
5.62%
Z-Score
1.645
Trading-Day Horizon
10
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.
Professional Review Status
This YMYL page has internal methodology review, but no external credentialed professional review is recorded yet.
- Reliance status
- Credentialed finance review required before advice-like claims
- Required credentials
- CFP professional, CFA charterholder, CPA, licensed financial professional
- Review scope
- assumptions, amortization logic, risk language, offer-comparison language, affordability guidance, and disclosure placement
Current reviewer: Laxman Kumawat, Internal finance formula and engineering methodology reviewer (Electrical and power-system related certifications).
This page provides educational estimates, not individualized financial advice, lending advice, investment advice, or a product recommendation.
Finance credentialed review: professional reliance limit
This page provides educational estimates, not individualized financial advice, lending advice, investment advice, or a product recommendation. Results should be treated as a preliminary estimate, not a filing instruction, diagnosis, product recommendation, eligibility decision, or compliance sign-off. Required professional review: CFP professional, CFA charterholder, CPA, licensed financial professional. Source expectation: Review should cite official lender, regulator, tax, or standards-body sources when the calculator depends on external rules.
Checked by Laxman Kumawat
Value at Risk Calculator (VaR) is checked for formula labels, source links, and result limits.
Laxman Kumawat, Finance & Engineering Calculator Owner. Updated May 2026. Scope: financial calculators.
Finance credentialed review: Named internal reviewer: Laxman Kumawat, Finance & Engineering Calculator Owner. External credentialed professional review is still required before this page is treated as professional advice.
Internal finance formula and engineering methodology reviewer. Review scope: calculator formulas, input labels, rate assumptions, scenario workflows, and user-facing limitations.
Credentials on file: Electrical and power-system related certifications.
Relevant review context: Professional background across engineering, sustainability, and energy-efficiency work; CalculatorWallah finance and engineering calculator owner.
Required professional credentials: CFP professional, CFA charterholder, CPA, licensed financial professional. Scope: assumptions, amortization logic, risk language, offer-comparison language, affordability guidance, and disclosure placement.
This page provides educational estimates, not individualized financial advice, lending advice, investment advice, or a product recommendation.
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
Related Calculators
Sharpe Ratio Calculator
Calculate Sharpe ratio from portfolio return, risk-free rate, and volatility.
Use Sharpe Ratio CalculatorSortino Ratio Calculator
Calculate Sortino ratio from portfolio return, target return, and downside deviation.
Use Sortino Ratio CalculatorTreynor Ratio Calculator
Calculate Treynor ratio from portfolio return, risk-free rate, and beta.
Use Treynor Ratio CalculatorInformation Ratio Calculator
Measure active return per unit of tracking error against a benchmark.
Use Information Ratio CalculatorRelated Guides
Sources & References
- 1.SEC Investor.gov - Financial Calculators(Accessed May 2026)
- 2.Corporate Finance Institute - Investment and Finance Formulas(Accessed May 2026)
- 3.CFA Institute - Investment Foundations(Accessed May 2026)