Value at Risk (VaR) in R Programming Language

Value at risk, or VaR is a statistic that quantifies the extent of possible financial losses within a firm, portfolio, or position over a specific time frame (Investopedia, 2022). This writing is provided to give technical guidance in conducting this analysis in R programming language. Case study presented here is a risk measurement in financial sector — single asset. Enjoy!

Value at Risk (VaR)

Conceptually Value at Risk represents the projected level of losses a trading desk needs to protect itself against under extreme conditions (financetrainingcourse.com, 2011). It is used as a proxy for the amount of capital required to support such losses.

Preparation

Firstly, prepare the required library to perform the analysis.

install.packages("PerformanceAnalytics", repos = "http://cran.us.r-project.org")
install.packages("dplyr", repos = "http://cran.us.r-project.org")
install.packages("tidyquant", repos = "http://cran.us.r-project.org")
install.packages("quantmod", repos = "http://cran.us.r-project.org")
install.packages("tseries", repos = "http://cran.us.r-project.org")
install.packages("tidyverse", repos = "http://cran.us.r-project.org")
library(PerformanceAnalytics)
library(dplyr)
library(tidyquant)
library(quantmod)
library(tseries)…