What is the definition of value-at-risk (VAR)for a one-year horizon?

Question

Quizplus · Accepted Answer

Value-at-risk (VAR) is a measure of the potential loss that a firm may face on a portfolio of assets with a given probability over a certain time period, in this case, a one-year horizon. It is not a measure of standard deviation, variance, or profits. Rather, it represents the amount of losses that the firm could incur with a certain level of confidence, such as a 95% confidence level, meaning the firm's losses would exceed VAR only 5% of the time. Therefore, the best choice is C.

What Is the Definition of Value-At-Risk (VAR)for a One-Year Horizon