The ultimate aim of any modern corporate is growth with profit maximization. Growth is the first and foremost characteristic of nature and its products which include modern societies with all their industrial, agricultural and service sectors and above all the research organizations to cater to the needs of primary, secondary and tertiary sectors. Governed by the laws of the universe and nature, societies, markets and above all human life are in the constant churn of development in the realm of creativity and innovativeness.

Globally, financial concerns are placing increasing reliance on statistical models to measure and manage financial risks, ranging from market risks to credit risks to operational risks over the past decade. Such models have gained credibility because they provide a coherent framework for identifying, analyzing and communicating these risks. This article gives a comprehensive idea about VaR which is a technique used to estimate the probability of portfolio losses based on the statistical analysis of historical price trends and volatilities.

Globally, financial concerns are placing increasing reliance on statistical models to measure and manage financial risks, ranging from market risks (such as exchange rate fluctuations) to credit risks (such as borrowers' default probabilities) to operational risks (such as expected losses due to fraudulent transactions) over the past decade as it would gain the credibility to provide a framework in identifying the risk.

In the early 80's & 90's many institutions promoted Value at Risk as a measure to support capital allocation and market risk extensions among the firm's institutional clients. It is a critical tool for tracking the riskiness of a firm's portfolio on a day-to-day level basis, and assessing the risk-adjusted performance of individual business units. However, it has been found to be with limited use in measuring firms' exposures to extreme market forces. Furthermore, observed correlation patterns between various financial prices has to be estimated that need to change when the price movements are large.

According to Basel Committee on Banking Supervision in 1995, the market risk capital requirements for banks has been approved the use of banks' own proprietary VaR measures in certain circumstances. In 1997, Securities Exchange Commission (SEC) of USA issued a directive to US companies to disclose quantitative measures of market risk with VaR listed as one of the three possible market risk disclosure measures.

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