Value At Risk (VAR) Financial Glossary

What is it? The amount or percentage of value that is at risk of being lost from a change in prevailing interest rates (similarly defined for things other than interest rates as well). The sensitivity of the value of a single financial instrument, a portfolio of financial instruments, or an entire entitys balance sheet to changes in interest rates can be calculated. The resulting sensitivity is the amount of value at risk. See earnings at risk for an alternative measure of interest rate risk. VAR, sometimes called equity value at risk or EVAR, can be calculated by at least four different mathematical expresions. The simplest and least accurate measure of VAR is the difference between the calculated economic value of equity (EVE) under one projected rate scenario and the calculated EVE under a different projected rate scenario.

Finance Term Definition Added By: Kennedy

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