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Value at Risk (VaR) is a statistical measure that quantifies the potential loss in value of an investment or portfolio over a specified time horizon and at a given level of confidence. It is commonly used in risk management to estimate the maximum loss that an investment or portfolio might experience over a specified period, assuming normal market conditions and a given level of confidence.

VaR is usually expressed as a percentage of the total value of the investment or portfolio, such as a 1% or 5% VaR, corresponding to the level of confidence. 

For example, a 5% VaR over a one-day time horizon for a $100 million investment or portfolio would indicate that there is a 5% chance that it will lose more than $5 million in one day.

VaR can be calculated using various methods, such as historical simulation, Monte Carlo simulation, or parametric models, depending on the complexity and nature of the investment or portfolio. It is important to note that VaR is not a guarantee of actual losses, as it only provides an estimate of the potential risk under normal market conditions.

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