VaR Time Conversions

Our starting point is to calculate Daily (1-day) VaR.

It is possible to convert VaR from one time-basis to another, e.g. daily to weekly.

The conversion formula is VaR (X%) for k Days = VaR (X%) Daily * โˆšk

PeriodDays (k)Square root
Daily11
Week52.3607
Month204.47213
Year25015.91139

Therefore:

ยง Weekly VaR = VARDaily * โˆš5
ยง Monthly VaR = VARDaily * โˆš20
ยง Yearly VaR = VARDaily * โˆš250

Example

If the Daily VaR for a particular asset A is 0.68%:

ยง Weekly VaR = 0.68 x โˆš 5 = 1.605
ยง Monthly VaR = x โˆš 20 = 3.041
ยง Annual VaR = x โˆš 250 = 10.819