Value at risk is a metric used to assess the financial risk posed by a company, investment portfolio, or open position over time. VaR calculates the potential for loss as well as the likelihood that this loss will occur.
The value at risk of a position is calculated by taking into account the amount of potential loss, the likelihood of the loss, and the time frame in which it could occur.
This is usually expressed as a percentage within a specific timeframe. For example, an asset could be said to have a 2% one-week VaR of 1%. This means that the asset has a 2% chance of falling by 1% in a single week.
It could, however, be presented as a numerical value. For example, a portfolio with a 5% one-day VaR of $1000 has a 5% chance of losing $1000 in a single day.

Value at Risk (VaR) is a financial metric that estimates the potential loss an investment portfolio might face within a given timeframe, at a specific confidence level. For instance, a daily VaR of $1 million at a 95% confidence level implies there's a 5% chance the portfolio could lose more than $1 million in a single day. VaR is widely used by financial institutions and investors to manage risk exposure and determine potential downside losses under normal market conditions. It accounts for three factors: the time horizon, the confidence level, and the potential loss amount. Despite its popularity, VaR has limitations, especially during extreme market events, as it doesn't fully capture tail risk or account for unexpected market shifts.