Which risk measurement technique is most commonly used to evaluate market risk in banks?​

Value at Risk (VaR) is a statistical measure used to assess the potential loss in value of a portfolio or asset over a specific time period at a given confidence level. It quantifies the maximum expected loss under normal market conditions, expressed in monetary terms. For example, a 1-day VaR of $1 milion at a 95% confidence level means there's a 5% chance the portfolio could lose more than $1 milion in one day. VaR is calculated using historical data, variance-covariance methods, or Monte Carlo simulations, considering factors like volatility and correlations. It's widely used in risk management by banks and investors but doesn't capture extreme "tail" events beyond the comfidence level. For instance, a 99% VaR misses the worst 1% of outcomes. It also assumes nommal market conditions and doesn't account for liquidity or non-linear risks