Value at Risk (VaR) Calculator [Free Tool]
Estimate the loss your position could reach at a given confidence level and horizon — and the expected loss beyond it. The risk-manager's number, in plain English.
Disclaimer: Trading financial instruments involves risk, and everything on this page is provided for educational purposes only. Nothing here is financial advice or a recommendation to buy or sell any instrument.
Value at Risk (VaR)
$3290.00
at 95% confidence over 1 day(s)
CVaR / Expected Shortfall
$4124.43
Average loss beyond the VaR threshold
CVaR answers: "given we exceed VaR, how bad is it on average?" It is always at least as large as VaR.
How is this calculated?
VaR = Amount × Volatility × z-score × √Days
CVaR = Amount × Volatility × (φ(z) ÷ α) × √Days
φ(z) = standard normal density at the z-score; α = 1 − confidence. CVaR > VaR always.
Read the full user guide
Every parameter, formula, and worked example — a complete reference for this tool.
What is Value at Risk (VaR)?
Value at Risk — VaR — condenses a position's danger into one sentence: 'there is a 95% chance this position loses no more than $X over the next N days.' It is the language risk managers speak, boiling volatility, position size, and time horizon down to a single comparable figure. The catch is that VaR says nothing about how bad things get on the other side of that 95% line, which is why the calculator pairs it with CVaR — the expected loss when the worst cases do arrive.
Key concepts
Confidence level
The probability threshold — 95% VaR means losses should exceed VaR only 5% of the time under the model.
Volatility input
The standard deviation of returns drives the estimate.
Time scaling
Loss scales with the square root of time under the normal model.
A worked example with real numbers
- 1
Enter the position and volatility
You hold a $10,000 position with 2% daily volatility and want a one-day, 95% VaR.
- 2
Apply the z-score
The 95% one-tailed z-score is 1.645, so one-day VaR = $10,000 × 2% × 1.645 = $329.
- 3
Scale for longer horizons
For five days, multiply by the square root of five: $329 × √5 ≈ $736. Risk grows more slowly than time under the model.
- 4
Read the caveat
The 5% of outcomes beyond $329 can be far worse. The CVaR figure estimates that tail loss, which is the number to watch.
How to use it
Enter position amount
The size of the position at risk.
Enter volatility and horizon
Expected volatility and number of days.
Choose confidence level
90%, 95% or 99%.
Read VaR and CVaR
The loss threshold and the expected loss beyond it.
The formula, step by step
VaR
VaR = Position × Volatility × z-score × √days
z-score depends on the confidence level.
Mistakes traders make
✗ Trusting VaR as an absolute upper bound on losses
✓VaR is a threshold under a model, not a guarantee. The 5% tail beyond it can be severe — exactly what CVaR tries to capture.
✗ Assuming returns are normally distributed
✓Markets have fat tails. Real losses exceed the normal-model VaR more often than the model predicts.
✗ Scaling daily VaR linearly over time
✓Under the standard model risk scales with the square root of time, not linearly — but that too is a modeling convenience, not a market fact.
When this tool fits — and when it does not
Use it when
- ✓Summarizing a single position's risk into one comparable number.
- ✓Comparing the riskiness of different positions or assets.
- ✓Setting a daily loss threshold as part of a risk discipline.
Skip it when
- ✗Relying on it for tail-risk management without CVaR.
- ✗Estimating portfolio risk without accounting for correlations.
- ✗Trading a position whose VaR you have not bothered to measure.
Practical tips that actually help
Always pair VaR with CVaR
VaR tells you the boundary; CVaR tells you how bad it gets beyond the boundary. The second number is the more valuable one.
Use it for comparison, not prediction
Ranking positions by VaR is defensible; quoting it as 'the most I can lose' is not.
Re-estimate when volatility changes
VaR is only as fresh as its volatility input. After a volatility expansion, the old number understates real risk.
Related & next steps
Frequently asked questions
What is VaR's main limitation?▾
It assumes a distribution (often normal) and says little about extreme tail losses. CVaR helps by focusing on losses beyond VaR.
What does 95% VaR actually promise?▾
Under the model's assumptions, losses should stay within the VaR figure 95% of the time. It does not promise that the other 5% is mild — the tail can be far deeper, which is exactly what CVaR tries to quantify.
Why does VaR scale with the square root of time?▾
Under the standard model, random daily moves partly cancel out over longer horizons, so risk grows with the square root of the number of days rather than linearly. It is a modeling convenience, not a fact of markets.
Is VaR meant for a single position or a whole portfolio?▾
It works for both, but the calculator here measures one position. A portfolio version would also need correlations between assets, which can reduce or increase total risk.
How is VaR different from max drawdown?▾
Max drawdown is a historical extreme that already happened; VaR is a forward-looking estimate of a loss threshold under a distribution. One is hindsight, the other is a probabilistic forecast.
Ready to validate your first strategy?
Put someone else's strategy — or your own idea — through the real data. Free to start, no card required.
No credit card required · 50 free credits on signup
VaR is a statistical model with assumptions and does not guarantee that actual losses will stay within the estimate.
Disclaimer: The tools and content on this site are provided for educational purposes only and do not constitute investment advice. Trading and investing involve a substantial risk of loss, and past performance does not guarantee future results.