> ## Documentation Index
> Fetch the complete documentation index at: https://docs.activeviam.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Parametric VaR

> The Parametric VaR calculation assumes that the PnL returns are normally distributed and also independent of each other. Consequently, the calculated standar...

The Parametric VaR calculation assumes that the PnL returns are normally distributed and also
independent of 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:

* Standard deviation of PnL over specified time period: 25,000
* Mean of PnL over specified time period: 50,000
* Z-score for 99% confidence level: 2.326

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

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