Derivatives & Risk

How is Value at Risk calculated?

Value at Risk (VaR) is a statistical estimate of the maximum loss a portfolio could face over a set period at a given confidence level. It is calculated three common ways: the historical method (ranking past returns), the variance-covariance method (using mean and standard deviation), and Monte Carlo simulation (modelling thousands of outcomes). For example, a one-day 95% VaR of 4% means losses should stay under 4% on 95 of 100 days. VaR estimates probable loss, not the worst case, and assumptions can break in stressed markets. Disciplined index construction begins with measuring downside exposure like this, which is how Qatobit's documented methodology frames its research.

Crypto investments are subject to market risk and volatility. Past performance is not indicative of future returns. This is general information, not investment advice — consider your own circumstances or consult a qualified adviser before investing.