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Value-at-risk (VaR)

The measure of how the market value of a portfolio will decrease over a given period of time with a given probability The VaR of a portfolio is the worst loss expected to be suffered over a given period of time with a given probability. The time period is known as the holding period, and the probability is known as the confidence interval. VaR is not an estimate of the worst possible loss, but the largest likely loss. For example, a firm might estimate its VaR over 10 days to be £100 million, with a confidence interval of 95%. This would mean there is a 1 in 20 (5%) chance of a loss larger then £100 million in the next 10 days.

In order to calculate VaR, a firm must model both the way the relevant market factors will change over the holding period and the way, if any, these changes are correlated between market factors. It must then evaluate the potential effects of these changes on its portfolio at the desired level of consolidation (by asset class, group or business line, for example).


Voltamperes reactive

Variation Margin

A variable margin payment that is made by clearing members to their respective clearing houses based upon adverse price movements of the futures contracts that these members hold.

Vertical Integration

Where one supply group owns two or more parts of the energy supply chain. For example, where the same supply group owns generation capacity and also supplies energy to the retail market.

Very Prompt Market

Gas or electricity for delivery for the early part of the remainder of the current month. Incorporates the Within Day,
Day Ahead and Weekend contracts.


Relative change of prices from one time period to another, often in the short run; also used as a measure of risk, hence viewed as a negative in that it represents uncertainty.

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