Abstract:

The dynamic development of the financial sector since the 1970s has prompted the formation of risk management. Nowadays, in the world of turbulent changes and globalized processes in the financial market, risk management has been used directly by the management of banks and other institutions. Value at Risk can be considered as one of the most important risk assessment tools in the financial sector. VaR measurement methods are based on standard Basel I, which describe the exact populated capital requirement calculations depending on the level of risk. This approach did not take into account the distribution of portfolio risks and the volatility of individual risk factors and this was the reason for the formulation of the Basel II rules and the formation of VaR models. This paper provides a brief overview of the historical development of the Value at Risk model from its foundations to the present days. We also focused on describing the basic VaR methods, on clear description of their calculation and comparing of their advantages and disadvantages. Despite the occasional criticism, the Value at Risk model can be considered as a very important and often used risk assessment tool in the financial sector.