Enter the expected weighted return, z-score, standard deviation, and the total value of a portfolio to calculate the value at risk.

Value At Risk Formula

The following formula is used to calculate a value at risk.

VaR = [EWR - (Z*STD)] * PV
  • Where Var is the value at risk
  • EWR is the expected weighted return of the portfolio
  • Z is the z score
  • STD is the standard deviation
  • PV is the portfolio value

To calculate value at risk, multiply the standard deviation return by the z score, subtract this result from the expected weighted return, then finally multiply by the portfolio value.

Value At Risk Definition

A value at risk is defined as the likelihood of an investment portfolio exceeding a certain amount of monetary loss.

Value At Risk Example

How to calculate value at risk?

  1. First, determine the expected weighted return.

    Calculate the expected return.

  2. Next, determine the z score and standard deviation.

    Calculate the z score and standard deviation.

  3. Next, determine the portfolio value.

    Calculate the portfolio value.

  4. Finally, calculate the value at risk.

    Calculate the value at risk using the formula above.


What is VAR?

VAR stands for value at risk. It is a measure of the confidence or likelihood of a given portfolio exceeding a certain loss. In other words, t’s a minimum loss in dollars over a given period based on probability of past performance.