What is Value at Risk (VaR)?
An example of an AI chatbot conversation about Value at Risk (VaR) in finance.
Can you explain what Value at Risk is?
Value at Risk (VaR) is a financial metric used to assess the risk of loss on an investment.
How is VaR calculated?
VaR can be calculated using historical data, variance-covariance method, or Monte Carlo simulations.
What does a VaR of $1 million mean?
A VaR of $1 million means there is a certain confidence level that the loss will not exceed $1 million over a specified period.
Are there any limitations to using VaR?
Yes, VaR does not predict extreme losses and can underestimate risk in volatile markets.
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