Value-at-risk (VAR)

 

Definition: The worst loss expected to be suffered over a given period of time with a given probability. The time period is known as the holding period and the probability is known as the confidence interval. Value-at-risk is not an estimate of the worst possible loss, but the largest likely loss. For example, a firm might estimate its VAR over ten days to be $100 million with a confidence interval of 95%. This would mean there is a one-in-twenty (5%) chance of a loss larger than $100 million in the next 10 days.

 

Volatility

 

Definition: Measures the rate of change in price movements.

 

Volumetric Risk

 

Definition: The effect of fluctuations in demand for a product or service on revenue.