Value at Risk (VAR)

A tool used by financial institutions that estimates probable losses based on historic trends, prices and volatility. Firms generally report VAR data at quarter-end, with confidence intervals, and for periods stretching from one day to two weeks.

JP Morgan is under intense scrutiny after reporting a $2 billion loss after publishing a VAR of just $76 million a quarter earlier for its entire credit portfolio. At that pace, the entire JP Morgan unit could have lost as much as $76 million in value in any given day (to a 95 percent confidence interval).