Value At Risk Report

Value at Risk is a number that represents an estimate of how much your portfolio may lose due to market movements for a particular time horizon and for a given confidence level (probability of occurrence). This report is completed overnight for a one-day horizon only. The report is based on account and, where applicable, sub-portfolios, and supports consolidated data for Advisor and Broker client accounts.

To find on-demand VAR, use the VaR tab in the Risk Navigator in TWS. On-demand VAR supports multi-day VaR, shows the Expected Shortfall, and allows you to choose between Monte Carlo and Historical VaRs.

Confidence Level

The Value at Risk report computes your Value at Risk (VAR) at a 99.5% confidence level using two simulation methods, Variance-Covariance and Historical. A 99.5% confidence level means that 99.5% of the time, your losses will be lower than the VAR number (shown in this report as P/L), while 0.5% of the time, your portfolio will experience greater losses.

Value At Risk Simulation

The Value at Risk report breaks your portfolio into sub-portfolios, each with exposure to a distinct set of risk factors. These numbers are generated by simulating scenarios of risk factor movements (e.g. stock price, FX rates, etc), using historical volatility and correlation experienced in the recent past.

For each symbol in a sub-portfolio and for each currency, we compute the simulated price, the percent difference between the price and the simulated price, and the monetary difference between the simulated value and the closing value. The simulations show the market outcome that was found at the 99.5% confidence level. Specifically, it shows the price of the underlying in that scenario, the percentage price change versus the previous close and the P&L for the sub-portfolio (the underlying and its derivatives) that results from that market outcome.

Value At Risk Report Reference