Conditional Value At Risk - CVaR
- A risk assessment technique often used to reduce the probability a portfolio will incur large losses. This is performed by assessing the likelihood (at a specific confidence level) that a specific loss will exceed the value at risk. Mathematically speaking, CVaR is derived by taking a weighted average between the value at risk and losses exceeding the value at risk.
This term is also known as "Mean Excess Loss", "Mean Shortfall" and "Tail VaR".
Conditional Value at Risk was created to be an extension of Value at Risk (VaR). The VaR model does allow managers to limit the likelihood of incurring losses caused by certain types of risk - but not all risks. The problem with relying solely on the VaR model is that the scope of risk assessed is limited, since the tail end of the distribution of loss is not typically assessed. Therefore, if losses are incurred, the amount of the losses will be substantial in value.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Tail value at risk — (TVaR), also known as tail conditional expectation (TCE), is a risk measure associated with the more general value at risk. It is equivalent to expected shortfall when the underlying distribution function is continuous at VaRα(X). This is not… … Wikipedia
Conditional budgeting — is a budgeting approach designed for companies with fluctuating income, high fixed costs, or income depending on sunk costs, as well as NPOs and NGOs. The approach builds on the strengths of proven budgeting approaches, leverages the respective… … Wikipedia
Conditional preservation of the saints — The Five Articles of Remonstrance Conditional election Unlimited atonement Total depravity … Wikipedia
Coherent risk measure — In the field of financial economics there are a number of ways that risk can be defined; to clarify the concept theoreticians have described a number of properties that a risk measure might or might not have. A coherent risk measure is a function … Wikipedia
Option time value — Finance Financial markets Bond market … Wikipedia
Marginal conditional stochastic dominance — In finance, marginal conditional stochastic dominance is a condition under which a portfolio can be improved in the eyes of all risk averse investors by incrementally moving funds out of one asset (or one sub group of the portfolio s assets) and… … Wikipedia
Audit risk — (also referred to as residual risk) refers to acceptable audit risk, i.e. it indicates the auditor s willingness to accept that the financial statements may be materially misstated after the audit is completed and an unqualified (clean) opinion… … Wikipedia
Contingent value rights — A Contingent Value Rights (CVR) is a type of option that can be issued by the buyer of a company to the sellers. It specifies an event, which, if triggered, lets the sellers acquire more shares in the target company. The New York Times claims… … Wikipedia
Foreign exchange risk — (exchange rate risk) Risk that the market value of the bank, measured in the base currency, is exposed to fluctuations in foreign exchange rates. This risk is quantified by the open currency position. The related standard reports are: • Open… … International financial encyclopaedia
Modern portfolio theory — Portfolio analysis redirects here. For theorems about the mean variance efficient frontier, see Mutual fund separation theorem. For non mean variance portfolio analysis, see Marginal conditional stochastic dominance. Modern portfolio theory (MPT) … Wikipedia
Markov switching multifractal — In financial econometrics, the Markov switching multifractal (MSM) is a model of asset returns that incorporates stochastic volatility components of heterogeneous durations. MSM captures the outliers, log memory like volatility persistence… … Wikipedia