An estimate of the largest loss a portfolio is likely to suffer over a set period at a given confidence level, such as 95% over one day. It says nothing about how bad the losses can be in the remaining few percent of cases.
Lesson
VaR (value at risk)
An estimate of the largest loss a portfolio is likely to suffer over a set period at a given confidence level, such as 95% over one day. It says nothing about how bad the losses can be in the remaining few percent of cases.