Value at Risk (VaR) is a key metric frequently used by risk departments in trading firms. It is defined as some defined percentile of the returns distribution of a portfolio over a fixed period of time. For example, a portfolio is said to have a 99% VaR of -2% if there is a 99% chance that it will not go down in value by 2% the following day. $$ $$ A common method for calculating the VaR is to take the previous 500 days of returns and sort them. The 99% VaR in this case will be the 5th largest loss in the list of returns.