Parametric VaR

The Parametric VaR calculation assumes that the PnL returns are normally distributed and also independent from each other. Consequently, the calculated standard deviation is used to compute a standard normal Z-score to determine the VaR.

Example of parametric VaR calculation:

The Parametric VaR for the specified time period with a 99% confidence level is:

50,000 - 25,000 * 2.326 = -$8,150

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