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Expected shortfall (ES) is a risk measure—a concept used in the field of financial risk measurement to evaluate the market risk or credit risk of a portfolio. The "expected shortfall at q% level" is the expected return on the portfolio in the worst q % {\displaystyle q\%} of cases.
Under some formulations, it is only equivalent to expected shortfall when the underlying distribution function is continuous at (), the value at risk of level . [2] Under some other settings, TVaR is the conditional expectation of loss above a given value, whereas the expected shortfall is the product of this value with the probability of ...
Since there are three risk measures covered by RiskMetrics, there are three incremental risk measures: Incremental VaR (IVaR), Incremental Expected Shortfall (IES), and Incremental Standard Deviation (ISD). Incremental statistics also have applications to portfolio optimization.
For example, if a portfolio of stocks has a one-day 5% VaR of $1 million, that means that 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. Informally, a loss of $1 million or more on this portfolio is expected on 1 day out of 20 days (because of 5% probability).
From a core autos standpoint, Murphy sees Tesla pushing its share of the auto market to 5% globally in the long term, making it a top 10 automaker. Tesla's upside: the ongoing trend toward ...
It is a possible alternative to other risk measures as value-at-risk or expected shortfall. It is a theoretically interesting measure because it provides different risk values for different individuals whose attitudes toward risk may differ.
That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. [ 1 ] [ 2 ] Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure ) measures both the upside and downside risk.
A Spectral risk measure is a risk measure given as a weighted average of outcomes where bad outcomes are, typically, included with larger weights. A spectral risk measure is a function of portfolio returns and outputs the amount of the numeraire (typically a currency) to be kept in reserve.