Value at Risk (VaR)

Also called: VaR

An estimate of the worst expected loss over a given period at a given confidence level — e.g. '1-day 95% VaR = $500' means there's a 5% chance of losing more than $500 tomorrow.

VaR is the institutional standard for portfolio risk. It collapses many positions into one number. Major weakness: it ignores what happens in the worst 5% — black swans break VaR.