Value at Risk (VaR) is a financial metric used to assess the potential loss in value of an investment or portfolio over a specified time period, given normal market conditions. It provides a statistical estimate of the maximum expected loss with a certain confidence level, often expressed as a percentage. For example, a VaR of $1 million at a 95% confidence level means there is a 5% chance that losses could exceed $1 million in the specified time frame. VaR is widely used by financial institutions, risk managers, and investors to gauge risk exposure and make informed decisions. It helps in setting risk limits and capital reserves, ensuring that firms can withstand potential losses. However, while VaR is a useful tool, it has limitations, such as not accounting for extreme market events or providing insights into the size of potential losses beyond the VaR threshold.