Define: Value At Risk

UK Accounting Glossary

Definition: Value At Risk

Quick Summary of Value At Risk

Value At Risk (VAR) is a mechanism for measuring market risk and credit risk.

What is the dictionary definition of Value At Risk?

Dictionary Definition

Value At Risk (VAR) is a measure of risk developed at the former US bank J.P. Morgan Chase during the 1990’s.

This measure of risk is most frequently applied to measuring both market risk and credit risk.

It is the level of losses over a particular period that will only be exceeded in a minuscule percentage of cases.

A cut-off value for gains and losses is established that excludes a certain proportion of worst-case results (e.g. the bottom 1% of possible outcomes); the value-at-risk is then measured relative to that cut-off value.


Full Definition of Value At Risk

VAR was initially designed to measure the overnight risk in certain highly diversified portfolios.

It has since been developed into an industry standard (within the Finance sector) and has been incorporated into the regulatory requirements applicable to financial institutions.

In the wake of the 2007-2008 financial crisis, there have been claims that VAR methodology played a detrimental contributory cause in the crisis, by fostering false confidence in the market and  by promoting excessive risk-taking.


Synonyms For Value At Risk

from the value, value-at-risk, risk potential, concerning the value, value-at-risk measure

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Value At Risk. Payroll & Accounting Heaven Ltd. April 04, 2020
Chicago Manual of Style (CMS):
Value At Risk. Payroll & Accounting Heaven Ltd. (accessed: April 04, 2020).
American Psychological Association (APA):
Value At Risk. Retrieved April 04, 2020, from website:

Definition Sources

Definitions for Value At Risk are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 5th May 2019.