Value at risk
In this lesson, you'll learn what value at risk is and how to calculate it—a critical tool for assessing investment losses under normal market conditions. Value at risk measures the potential loss from an investment or portfolio over a specific holding period (typically 1–10 days) using the normal distribution.
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In this lesson
- 0:00 Value at risk explained
- 1:01 Key information and formula
- 2:02 Using normal distribution tables
- 3:55 Worked example calculation
About this lesson
This concept appears across CIMA and ACCA qualifications, particularly in papers covering financial management and risk analysis. You'll work through the core formula: value at risk equals the mean minus the standard deviation multiplied by the z-value from the normal distribution table. The video walks you through how to extract the correct z-value for different confidence levels (such as 99% or 95%) using the standard normal distribution tables provided in your exam. Using a worked example, you'll see how to apply these steps to calculate the actual value at risk for an investment, then interpret what your result means in practical terms. By the end of this lesson, you'll understand when and why value at risk matters for investors and banks, and you'll be confident using the normal distribution tables to solve value at risk questions under exam conditions.
Duration: 5m
Transcript
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