1% VAR or a 5% VAR and why?
1% VaR is “more extreme” in the sense that it is a bigger minimum loss than that calculated in 5% VaR.
In turn, I would think that 5% VaR should be considered a more “conservative” measure.
1% is more conservative because it yields a higher var (because of higher confidence interval = 2.33). The higher the var the more conservative you are.
Like bilal said the 1% is a more conservative estimate in terms of the size of the VAR. There is a much smaller room for error as opposed to the 5% VAR
I wouldn’t say either is more conservative, they’re just different points on a curve. It’s like saying “what’s more conservative, the 1st percentile, or the 5th percentile?”