# Where to get confidence level value for VAR calculation?

Where to get confidence level value for VAR calculation?

Hi there

VAR = k x standard deviation x square root of periods
K is the probability level and is given in all solutions with 1.645 for the 95% confidence interval i.e. 5% VAR.

How do I find out k? Is anywhere a table with the relevant values?
The world wide web suggests that this equals the so called Z-scores but which is given with 1.96 for the 95% level....

Thanks!
Cathrine

May 28th 2015

## 4 Replies

95% Confidence level gives 1.645...0.45 from the mean going to your left.... locate 0.45 on the std normal distribution table, on you left u get 1.6 and the top 0.04 ...add the 2 to get 1.64 assuming u picked 0.4495 from the table. in simple terms its more like an intersection. To be exact though, pick 0.4505 which is an intersection of 1.6 on the left and .05 on the top... giving a total of 1.65(to answer your question directly)
Now try it out with a confidence level of 99%, again from the mean  it gives u a value of 0.49, locate that intersection on the table(0.4901 to be exact), pick figures on the left and that of the top 2.3 and 0.03 respectively , total 2.33.
Atleast this is what i have learnt from this group as i earlier posted a question on calculating Z-scores when they were not making sense.
May 29th 2015 410 Points 1 Flag
Reshown May 30th 2015 AN ACCA USER
0.45 is not expressly on the table meaning that value u pick from there should be rounded off to give u 0.4505 which will give u a z-score of 1.65, if u pick 0.4495 (rounded off 0.45 as well) from the table, your z-score will be 1.64 etc

The better news is that the z-score is usually given in the exam (i stand to be corrected)... so u dont have to worry about calculating it, just ensure u know how to use it
May 30th 2015 410 Points
+1 Vote

Confidence level value is not so difficult. for example if it is 90% confidence then looking at the normal distribution table we deduct 0.5, remaining is 0.4 looking at the table we get value.

That value when multiplied by the sd and root square time, we get the expected decrease in value of the project over the period. it is 90 percent confident that the project value will not decrease by more than that value. Please write me to nrjsma@gmail.com if you have any further questions or you want more clarification on any topics.

May 17th 2016 420 Points