QuoteOriginally posted by: teaplus1the prime brokers I have worked with (Goldman Sachs, UBS, Morgan Stanley) all use a combination of simple worst-case scenarios ("what if all stocks fall X%", "what if your 5 greatest positions fall Y%", "what if the least liquid stocks fall Z%", etc) to find margin requirement for hedge funds. No mention of VaRThis is because VaR is a communication tool. If, as a customer, you told your broker what the worst-case scenario is for your portfolio, he would not waste his time reading the email. If Goldman told a regulator what their worst-case scenario is, the regulator would say whatever, give me a standardized measurement like VaR. When measuring your own risk, you can use whatever you want. When measuring the risk experienced by other people's money, people expect you to lie to them.So the measurement becomes a complicated issue when there is an incentive to lie, specifically when you are talking about other people's money, which is specifically finance.It is not hard to tell if you eat a cookie. There are no websites that offer tips like "Do you have crumbs on your mouth? Then you ate a cookie." And there are also no websites that discuss how to tell if someone else ate a cookie. Because people generally eat their own cookies. And there are not websites that discuss how to tell if someone else ate your cookies, because it is not that big a deal. Again, it is only in finance where someone else holds your cookies, and it is big enough to matter.