What Is Value at Risk (VaR)?

Value at Risk (VaR) is a metric that evaluates and quantifies the degree of financial risk in a company, portfolio, or position over a certain period of time. Investment and commercial banks use this statistic to evaluate the size and incidence ratio of possible losses in their institutional portfolios.
VaR is a tool that risk managers use to assess and manage risk exposure. VaR estimates may be used to assess single holdings or whole portfolios, as well as to assess firm-wide risk exposure.