Value at Risk (VaR) Calculator
Assess potential portfolio losses using parametric, historical simulation, and Monte Carlo methods
Value at Risk (VaR) Calculator
About This Calculator
The Value at Risk (VaR) Calculator estimates the maximum potential loss of a cryptocurrency portfolio over a specified time horizon at a given confidence level. VaR is a fundamental risk management tool used by traders and investors to quantify downside risk.
VaR Methods
- Parametric VaR: Assumes normal distribution of returns. Uses z-score, volatility, and time horizon. Fast but assumes normality.
- Historical Simulation: Uses actual historical returns to estimate VaR. Non-parametric, captures real market behavior but requires sufficient data.
- Monte Carlo Simulation: Generates thousands of random scenarios based on statistical parameters. Most flexible but computationally intensive.
Key Parameters
- Portfolio Value: Current total value of the investment portfolio
- Confidence Level: Probability that actual loss won't exceed VaR (95% or 99%)
- Time Horizon: Period over which risk is measured (typically 1 day, 10 days, or 1 month)
- Volatility: Standard deviation of returns (annualized for parametric method)
- Historical Returns: Comma-separated list of past daily/period returns for historical method
Use Cases
- Daily risk monitoring for crypto trading positions
- Portfolio stress testing and scenario analysis
- Regulatory compliance and risk reporting
- Position sizing based on risk tolerance
- Comparing risk across different crypto assets or strategies