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Risk Management

  Risk Management   |   Terms
  • 2020
  • March 2, 2022
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Absolute VaR

A measure of risk (value at risk or VaR) that, for of a portfolio/ a fund, is defined by a maximum (capped) percentage of net asset value (NAV). In other words, this measure estimates the monetary value of underperformance of a portfolio/ a fund (i.e., in absolute terms as a function of risk and return). It captures the worst loss over a target time horizon with a given level of confidence, expressed in absolute terms, covering the potential negative changes in the value of holdings with a given probability level.

For example, at a given percentile, absolute VaR represents the difference between the future value and the current value of the portfolio/ fund.


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