Abstract:

The Value at Risk (VaR) model can be considered one of the most well-known and frequently used risk calculation models. Its essence is to calculate the statistically highest possible loss, which will not be exceeded for a certain time interval at the chosen probability rate. However, our article entitled "Usage of Value at Risk Model to Measure the Risk of Trading positions in the Trading Process" looks at this model from a different angle. The aim of our paper was to explore the possibilities of using this model for risk quantification in the trading process and to propose a new procedure for quantifying the probability of collapse of individual trading positions. In our article, we briefly summarized the history of Value at Risk and its use. In the next part of our article, we have detailed the formulas and the procedure for quantifying one-day and multi-day VaR with the necessary clarification of variables. However, we consider the greatest added value of our contribution to be the adjustment of the VaR calculation method to calculate the probability of collapse of individual market positions, which we believe will contribute to streamlining risk management in the trading process and improving results.