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Value at Risk (VaR) Calculator

This utility lets you estimate the potential losses on a portfolio or investment using Value at Risk (VaR), one of the most important tools in financial risk management.

What is VaR?

  • VaR tells you "how much you could lose, with a certain probability, over a set time period."
  • Example: "There is a 5% chance I lose more than $1000 tomorrow on this portfolio."
  • Used by banks, asset managers, hedge funds—anywhere risk needs to be measured and controlled.

How to Use

  1. Get your returns data (daily, weekly, or monthly returns).
  2. Call value_at_risk() from var_calculator.py, giving it your returns and desired confidence level (like 95%).

Example

from var_calculator import value_at_risk
import numpy as np
returns = np.random.normal(0.001, 0.02, 252)
print('95% VaR:', value_at_risk(returns, confidence_level=0.95))

Why Does It Matter?

  • Professionals use VaR to measure the risk of stocks, funds, portfolios, and entire banks!
  • Helps decide capital requirements and set trading limits

For more financial learning, see other UTILS and Documentation modules.