In the wikipedia page on VaR

The example says:

For example, if a portfolio of stocks has a one-day 5% VaR of $1 million, there is a 0.05 probability that the portfolio will fall in value by more than $1 million over a one day period if there is no trading.

What is the reason for the clause 'if there is no trading'?

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    $\begingroup$ If there is trading the portfolio caracteristics (assets risk return weights) might change therefore the VaR will change $\endgroup$ – adelm Jan 28 '14 at 16:44

I think it's related to the parameters of your portfolio! Indeed, as it's a 1-Day VaR, then it tells you that you have 5% propability that your portfolio would fall under 1$M, because the market movements are random and you have 5% chances to be on the bad side of these movements. But if you make a trade (or completely liquidate your position on this portfolio) than you will change the parameters (for example : credit default probability will change if you swap a CCC bond with a AAA bond) of your portfolio!

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  • $\begingroup$ @Richard: Thanks ;) and i appologize for those mistakes! i'm trying to improve my english :) $\endgroup$ – aajajim Jan 29 '14 at 12:27

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