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VaR has five main uses in finance:
risk
management, risk measurement, financial control,

financial reporting and computing regulatory
capital. VaR is sometimes used in non-financial applications as
well.^[3]

Important related ideas are economic
capital, backtesting,
stress
testing and expected
shortfall.^[4]

Common parameters for VaR are 1% and 5% probabilities and one
day and two week horizons, although other combinations are in
use.^[5]

The reason for assuming normal markets and no trading, and to
restricting loss to things measured in
daily accounts, is to make the loss observable.
In some extreme financial events it can be impossible to determine
losses, either because market prices are unavailable or because the
loss-bearing institution breaks up. Some longer-term consequences
of disasters, such as lawsuits, loss of market confidence and
employee morale and impairment of brand names can take a long time
to play out, and may be hard to allocate among specific prior
decisions. VaR marks the boundary between normal days and extreme
events. Institutions can lose far more than the VaR amount; all
that can be said is that they will not do so very
often.^[6]