value at risk

i will try to explain it to you in simple english. 95% confidence level means there is a 5% chance of making a loss. from the shape of the normal diagram there is a 50% chance that some will be above the mean and 50% chance that some will be below. those above the mean are the positive ones and those below are the negative ones. since we a looking at the negative side of things ie if things go wrong, thus subract 5% from 50 and you will get 45% which is 0.45 go to your normal distribution table and look for the figure that will give you 0.45. you will find that it lies between 1.64 will give you 0.04495 and 1.65 wil give you 0.4505. i hope it helps NOW I WILL ADD THIS TO THE QUESTION IF ANYONE CAN HELP WHAT IS THE SIGNIFICANCE OF THIS 1.65

Thanks mate!! that was a well brief explanation :)

The significance of the 1.65 is that the 'cut-off' (the amount that there is a 5% chance of being below) is 1.65 x the standard deviation below the average.

so if the mean was say 50000 and standard deviation say 15%

The standard deviation need to be in $'s

so if the mean is 50000 and the standard devaition is say 5000 it means with a 95% confidence level, there is a 5% chance that the maximum loss will be 1.65 x 5000 = 8250. am i right?

Almost. There is a 5% chance of it being below 50,000 - 8250 = 41750

thank you John for the time you have granted me

You are welcome :-)