Value at Risk (VaR)

Value at Risk (VaR) is a statistical estimate of the maximum loss a portfolio is not expected to exceed over a given time horizon at a chosen confidence level — e.g. a 1-day 95% VaR of $1,000 means losses should stay under $1,000 on 95% of days. Its key flaw is that it says nothing about how bad losses get in the remaining tail, which is why traders pair it with CVaR.