Finance
Estimate value at risk (VaR)
=NORM.INV(0.05,B1,B2)How it works in Excel
- 0.05 means the worst 5% of outcomes.
- B1 is the average return.
- B2 is the standard deviation.
- Multiply the result by your portfolio value to get dollars.
- This assumes returns follow a bell curve, and real markets have worse extremes.
The idea in general
It says how bad a poor period might be, at a chosen level of confidence.
What I assumed
- The average return is in B1 and the standard deviation is in B2.
Check the result on your own data before relying on it.