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Risk Management




Daily Value at Risk


A measure of daily losses for a position (or a portfolio, fund, entity, etc.) that arise from a risk factor involved (value at risk, VaR). The losses are determined based on a set of inputs: size of the position, confidence level (and corresponding Z-score), and actual daily standard deviation of the position (over one trading year). For a confidence level of 95%, a Z-score of 1.645 is used.

Daily value at risk can be given as:

Daily value at risk = position size × Z-score × standard deviation



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