Value at Risk (VaR): Parametric Method Explained

[@RyanOConnellCFA]

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[@imirosmanov2745]

Dear Ryan, hi. Please advise if the formula for parametric VaR = mean + standard deviation * percentile is correct or should use your formula = mean - standard deviation * z-score? I want to use it for operational risk VaR calculation.

[@glimpseoffutureindia386]

How did you get z score. Isn't it 1.96 for normal distribution.

[@RyanOConnellCFA]

Hey there, I believe you are think about a two tailed test. VaR is just a 1 tailed test as we only care about the loss side of the distribution. (left tail only). So the Z-score for a one tailed test at the 95% confidence interval is 1.65