What is time at risk?

How safe is an investment, and for how long? That’s the million dollar question. Time at risk, or TaR, is a measure of market risk. It helps you calculate the maximum period of time that an adverse event would not occur to keep an investment safe.

Where have you heard about time at risk?

TaR is most often used by commercial and investment banks to predict the worst case scenario so they can protect their portfolios from adverse market movements. But you can also apply TaR to your own financial planning to measure longevity risk.

What you need to know about time at risk.

TaR is similar to value at risk (VaR), which measures the maximum amount of loss that is anticipated to occur with an investment, at a particular 'confidence level'.

For example, for an asset worth £100 million that has a 95% confidence level, there is a only a 5% chance that the value of the asset will drop more than £100 million.

If the TaR is 95% for 3 years, it means there's only a 5% chance that the asset is at risk within that time.

Find out more about time at risk.

Read our definition of value at risk to see a similar way of calculating market risk.