Charles Anthony R_ Garcia#69

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What is conditional value-at-risk (CVaR)?

Conditional value-at-risk, also called expected shortfall, measures average losses beyond the VaR threshold. It provides a clearer view of tail risk in extreme conditions. For example, if daily VaR is $1,000 but actual worst-case losses average $2,500, CVaR highlights this exposure. CVaR is considered more reliable than VaR for managing catastrophic risk. It helps traders prepare for rare but impactful market moves like black swan events.