What is VaR margin? How is it calculated?

Value at risk (VaR) is a measure of potential losses in a portfolio at any given day, at a particular
confidence (significance) level. For instance, if the 95% VaR of a $100 million portfolio is 8%, it means
that on any given day we could be 95% confident that the portfolio will not lose more than 8% ($8 million)
of value. Alternately, we could conclude that we are 5% confident that on any given day, we could lose $8
Mn or more.
VaR tells us (at a particular level of significance) how much at the minimum we could lose, without telling
us the true extent of losses. It also doesn't tell us how likely are we going to see those loss days in a given
time frame.
It is normally calculated by taking the product of the z-critical value at a given confidence level and the
daily standard deviation of returns and subtracting this product from the expected returns of the
portfolio.
An alternative way is to multiply the z -critical value with the standard deviation of returns and the
sensitivity measure of a portfolio (eg. Duration for a bond portfolio).
The VaR diagram shows you the shaded portion as the amount of lossyou can suffer. 95% confidence level
means 5% level of significance. As you decrease the level of significance, VaR will increase. You must only
look at the left tail of the normal distribution since VaR is a one-tailed test and we are concerned only with
losses.