Kuantile
What Is Value at Risk (VaR)? A Plain-Language Guide
You check your portfolio's value every day — but do you know how much you could plausibly lose tomorrow? In institutional finance the answer to that question is Value at Risk, or VaR. From bank treasury desks to pension funds, professionals define their risk limits with this metric; Kuantile runs the same calculation for your portfolio.
What VaR says in one sentence
"1-day VaR at 99% confidence = 12,000 TRY" means: under normal market conditions, on 99 out of 100 days your daily loss will not exceed 12,000 TRY. Read in reverse: roughly one day in a hundred, it may. VaR is not a forecast — it is a boundary drawn from the historical distribution of returns.
The historical simulation method
There are several ways to compute VaR; Kuantile uses the most transparent one, historical simulation:
- Take each asset's historical daily returns, in TRY terms (currency effect included).
- Apply today's portfolio weights to those returns — producing thousands of "what your portfolio would have done" days.
- Sort the results; for 99% confidence, the boundary of the worst 1% is your VaR.
The method's virtue is that it assumes no distribution: the 2018 lira shock and the 2020 Covid crash enter the calculation exactly as violently as they happened.
95% or 99%?
The 95% level draws a calmer line — expected to be breached about once in 20 days; 99% about once in 100. A short-term trader can manage daily swings with 95%; a long-term saver should look at 99% to see tail risk. Kuantile lets you switch between the two with one click.
What VaR does not tell you
VaR is a threshold; it says nothing about what lies beyond it. On that 1-in-100 bad day the loss may sit just past the line or far deeper. That is why VaR should be read together with stress tests, which show what your portfolio would actually endure in history's known disaster windows.
A practical habit
Experienced investors track VaR as a ratio and a trend rather than an absolute number: what share of the portfolio is at risk, and is it growing? Kuantile's weekly reports state automatically whether your VaR rose or fell versus the start of the period — add a volatile asset and you will see its risk bill in the next report.
Compute your portfolio's VaR →