Value at Risk summarises downside in one number: at a chosen confidence (commonly 95% or 99%) and horizon (a day, a week), VaR is the loss your portfolio is not expected to exceed. A 1-day 95% VaR of 4% means that on 95 of 100 days, losses should stay under 4%.
VaR is intuitive but has a blind spot — it says nothing about how bad the other 5% of days get. That tail is exactly what Conditional VaR (CVaR) addresses, which is why the two are usually read together.
Formula
VaR_α = the α-quantile of the loss distribution (e.g. 95th percentile loss)
Example
A strategy's 95% daily VaR is 3% — so a 7% down day is one of the rare tail events VaR explicitly does not bound.
How Noon Barbari uses Value at Risk (VaR)
Every concept here is implemented in the platform. Open the relevant docs or tool to see it in action.
See risk metrics in noonbarbari →Related terms
- Statistics
Conditional Value at Risk (CVaR)
The average loss on the bad days beyond the VaR threshold — the size of the tail.
- Statistics
Standard deviation
Square root of variance — the most common volatility measure in trading.
- Risk
Maximum drawdown
The deepest peak-to-trough decline observed across the entire equity curve.
- Backtesting
Monte Carlo Simulation
Resampling trade outcomes many times to get a distribution of results instead of one number.