It stands for value-at-risk; the amount of loss that is expected, at some specific or pre-specified probability (confidence level), to be reached or exceeded during a defined time period. In other words, the value at risk (VaR) is a tool, commonly used by banks and other financial institutions, to estimate the monetary amount of the probability that a portfolio of financial instruments would incur losses. This estimate is typically based on a statistical analysis of certain aspects such as historical market price trends, correlations, and volatilities. With VaR, a firm can enhance its decision making in relation to specific activities like trading and hedging. It is easy to apply VaR methodology to financial firms because they are marked to market on a daily basis. In contrast, applying VaR to non-financial firms is normally more difficult because their assets are not marked to market on a day-to-day basis (but quarterly instead).