For the same position, VaR grows as the confidence level rises. For the variance-covariance method, which assumes profit and loss follow a normal distribution, a factor of 2.33 is used on the standard deviation of profit and loss at a 99% confidence level in some cases1.

Notes

  1. Financial System and Bank Examination Department, Bank of Japan, "Ⅱ．市場リスクの把握と管理" (II. Understanding and managing market risk; Financial Systems and Bank Examination Department, Center for Advanced Financial Technology; basic seminar), June 2012, sections "Ａ．分散共分散法" and "分散共分散法" (variance-covariance method), pages 23–24 (in Japanese). ↩