Conditional Value-at-Risk

Measure and quantify expected loss from unlikely scenarios

Conditional value-at-risk (CVaR) is the extended risk measure of value-at-risk that quantifies the average loss over a specified time period of unlikely scenarios beyond the confidence level. For example, a one-day 99% CVaR of $12 million means that the expected loss of the worst 1% scenarios over a one-day period is $12 million. Conditional value at risk is also known as expected shortfall.

Practitioners in both risk management and portfolio management are increasingly using conditional value-at-risk. For example:

Depending on the asset classes and types of risk exposure, risk managers employ various mathematical techniques to calculate conditional value-at-risk, including:

For more information, see Statistics and Machine Learning Toolbox™, Financial Toolbox™, Financial Instruments Toolbox™, and Risk Management Toolbox™.

See also: risk management, market risk, value-at-risk, backtesting, Basel III