VaR – the most widely used term for Value at Risk is a measure that gives the maximum loss that is most likely to occur in an investment or trading position for a particular period of time. In other words, it can be said that VaR is the maximum potential downside risk of an investment for a given holding period of that investment. The factors that are considered for computing VaR are the value of the investment, the time of holding, the potential volatility for a given holding period in terms of annual percentage and finally the level of confidence, which is the maximum amount of loss. Chances are. , Various methods are available for the calculation of VaR. It is measured either as a percentage or directly as real money. If you are a commodity trader, the VaR calculator is easily available on the Multi Commodity Exchange (MCX) website. It can be accessed at the following link: https://tinyurl.com/var2022
Here you can select the commodity and choose the number of days you wish to hold, the level of confidence and volatility for a specific period. After giving these inputs, the calculator will give us the VaR in terms of money. For example, holding one lot of a gold futures contract for a period of two months with a 95% confidence level has a VaR of ₹2,33,585.
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