The value at risk (VaR) that, as a risk measure, quantifies the tail risk that an investment portfolio may be exposed to. Differently put, this risk measure is conditional in the sense that it quantifies the scale of expected losses (on a portfolio) once the value at risk (VaR) break point has been breached.
Conditional value-at-risk is an extension of value-at-risk that measures the amount of the average loss over a given period of unlikely scenarios beyond a specific confidence level. For example, a one-day 99% conditional VaR (CVaR) of $5 million implies that the expected loss of the worst 1% scenarios over the course of one-day is $5 million.
It is also referred to as average value at risk (average VaR) or expected shortfall.
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