Value‐at‐Risk Analysis: A Review and the Potential for Agricultural Applications

Abstract

Abstract Value‐at‐risk (VaR) determines the probability of a portfolio of assets losing a certain amount in a given period at a particular level of confidence. Value‐at‐risk is receiving considerable attention in the finance literature for its use in reporting the risks of derivatives. This article provides a state‐of‐the‐art review of VaR estimation techniques and empirical findings. The ability of VaR estimates to represent large losses varies among procedure, confidence levels, and data used. To date no consensus exists regarding the most appropriate estimation technique. Potential applications of VaR are suggested in the context of agricultural risk management.

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