Normal distribution tables - part 3
Taught by Nick Drape · AI tutor support included
In this lesson, you'll learn how to calculate value at risk (VaR) using normal distribution tables and confidence levels—a crucial risk management technique for investment decisions.
This lesson is part of a paid course
Buy the course to unlock every video lesson and the AI Tutor, plus mock exams with feedback on CIMA courses.
Already bought? Sign in
Ask the AI tutor anything about this lesson
It knows every lesson in the course — explanations, clarifications, practice questions.
In this lesson
- 0:00 Understanding value at risk and confidence levels
- 1:20 Calculating value at risk formula and mechanics
- 2:48 Applying 99% confidence level to VaR
- 4:21 Project Wakefield worked example
- 6:02 Calculating VaR at different confidence levels
About this lesson
Value at risk identifies the lowest possible portfolio or project value within a given confidence level, telling you the probability that actual outcomes will fall below that threshold. You'll work through two practical examples using 95% and 99% confidence levels, applying the formula: expected value minus (standard deviation × Z-score) to find the floor value where only 5% or 1% of outcomes fall below. This technique is essential for financial professionals assessing investment risk and is directly relevant to FM (Financial Management) and risk management modules across ACCA and CIMA qualifications. By mastering VaR calculations, you'll be able to confidently communicate risk exposure to stakeholders and support informed investment decisions—a skill that demonstrates real commercial value in banking and corporate finance roles.
Duration: 8m
Transcript
Every lesson comes with a full searchable transcript - included with the course.
Get the P2 Objective Test course
All 121 video lessons, timed mock exams marked instantly with an explanation for every question, an AI Tutor in every lesson and lifetime access.
Already bought? Sign in