What is VaR?
Value-at-Risk (VaR) is a statistical measure used to quantify potential exchange-rate risk over a specified period and confidence level.
Importantly, VaR is not an exchange-rate forecast. It does not mean that the USD/MNT rate is expected to reach a particular level next week. Instead, it provides an estimate of the potential size of exchange-rate movements based on historical data and statistical models.
Weekly closing rate: 3,595.56 MNT/USD
99% VaR:
- EGARCH: −0.015% → 3,595.02; +0.0179% → 3,596.20
- Historical Simulation: −0.1077% → 3,591.69; +0.0691% → 3,598.04
For example, a person with a USD-denominated debt faces higher MNT repayment costs if the USD appreciates. Someone holding USD assets faces the opposite valuation effect.
Important: These estimates measure potential risk based on historical data and statistical models. They do not predict future exchange rates and should not be used as the sole basis for investment, currency-trading, or financial decisions.