Value at Risk (VaR)
It is a method to quantify exposure to market risk, using traditional statistical techniques.
The Value at Risk measures the loss that could be suffered under normal market conditions over a period of time and with a certain level of probability or confidence.
It is a statistical measure of risk frequently used by institutions that want to measure the risks in investment portfolios.
For example, an investor who has a portfolio of assets worth 10 million pesos, could establish that the daily VaR of his portfolio is $ 250,000 with a 95% confidence level. In other words, only 1 day out of every 20 days of market operation (1/20 = 5%), under normal conditions, the loss that will occur may be equal to or greater than $ 250,000.00.
Kurtosis
It is a statistical measure that describes the pointing or flattening of a certain distribution with respect to a normal distribution. Positive kurtosis indicates a relatively pointed distribution, and negative kurtosis indicates a relatively flattened distribution. In a normal distribution, the kurtosis is equal to 3, values greater than 3 are called excessive kurtosis. The case of excessive kurtosis indicates that there is a greater probability that the observed returns are further from the mean than in a normal distribution. Leptokurtosis is called the attribute of a distribution with very high rates of kurtosis.
Skewness or bias
Statistical measure that describes the symmetry of the distribution around an average. If the bias is zero, the distribution is symmetric; if the bias is positive, the distribution a will have an asymmetric tail extended towards the positive values. A negative skew indicates a distribution with an asymmetric tail extended toward negative values.
