Explain main features of the Value at Risk (VaR).

Following are main features of VAR Components of Calculations: VAR calculation is based on following three components: Time PeriodConfidence Level – Generally 95% and 99%Loss in percentage or in amount Statistical Method: It is a type of statistical tool based on Standard Deviation. Time Horizon: VAR can be applied for different time horizons say one day, one week, one month and so on. Probability: Assuming the values are normally attributed, probability of maximum loss can be predicted. Risk Control: Risk can be controlled by setting limits for maximum loss. Z Score: Z Score indicates how many standard Deviations is away from Mean value of a population. When it is multiplied with Standard Deviation it provides VAR.