VaR (Historical) is a measure of downside risk that aims to predict the maximum loss in a given day. This is predicted within confidence intervals, usually of 95% or 99%, which implies that with 99% we expect no more than a X% in any given day. VaR can be measured using three methods: historical VaR, Variance-Covariance method, or Monte Carlo Simulation.

We will focus on Historical VaR, which essentially considers historical data and makes the assumption that the past is likely to represent the future. The worst 1% or 5% of returns, depending on the chosen confidence interval, are taken to represent the worst returns that are likely to happen going forward.

More information on VaR is available here.

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