What is 'Conditional Value At Risk  CVaR'
Conditional Value at Risk (CVaR) also known as the expected shortfall is a risk assessment measure that quantifies the amount of tail risk an investment portfolio has. CVaR is derived by taking a weighted average of the “extreme” losses in the tail of the distribution of possible returns, beyond the value at risk (VaR) cutoff point. It is used in portfolio optimization.
BREAKING DOWN 'Conditional Value At Risk  CVaR'
Conditional Value at Risk (CVaR) attempts to address the shortcomings of VaR model, which is a statistical technique used to measure the level of financial risk within a firm or an investment portfolio over a specific time frame. While VaR represents a worstcase loss associated with a probability and a time horizon, CVaR is the expected loss if that worst case threshold is ever crossed. CVaR, in other words, quantifies the expected losses that occur beyond the VaR breakpoint.
Safer investments like largecap U.S. stocks or investment grade bonds rarely exceed VaR by a significant amount. But more volatile asset classes, like smallcap U.S. stocks, emerging markets stocks or derivatives, can exhibit CVaRs many times greater than VaRs. Ideally, investors are looking for small CVaRs. However, investments with the most upside potential often have large CVaRs.
Conditional Value at Risk Formula
Because CVaR values are derived from the calculation of VaR itself, the assumptions that VaR is based on, such as the shape of the distribution of returns, the cutoff level used, the periodicity of the data, and the assumptions about stochastic volatility, will all affect the value of CVaR. Calculating CVaR is simple, once the VaR has been calculated. It is the average of the values that fall beyond the VaR:
p(x)dx = the probability density of getting a return with value “x”
c = the cutoff point on the distribution where the analyst sets the VaR breakpoint
VaR = the agreedupon VaR level

Value At Risk  VaR
Value at risk is a statistic that measures and quantifies the ... 
Original Equipment Manufacturer ...
An OEM provides the components in another company's product, ... 
Probability Distribution
A probability distribution is a statistical function that describes ... 
Risk Management
Risk management occurs anytime an investor or fund manager analyzes ... 
Incremental Value At Risk
Incremental value at risk is the amount of uncertainty added ... 
Tail Risk
Tail risk is portfolio risk that arises when the possibility ...

Personal Finance
Backtesting ValueatRisk (VaR): The Basics
Learn how to test your VaR model for accuracy. 
Investing
Value at Risk (VaR)
Value at risk, often referred to as VaR, measures the amount of potential loss that could happen in an investment or a portfolio of investments over a given time period. 
Investing
How Investment Risk Is Quantified
FInancial advisors and wealth management firms use a variety of tools based in modern portfolio theory to quantify investment risk. 
Managing Wealth
JP Morgan: The Other Side Of The Hedge
A hedge is supposed to decrease overall risk, but when it's instead used to increase profits, the risk can be multiplied. 
Trading
Introduction To Counterparty Risk
Unlike a funded loan, the exposure from a credit derivative is complicated. Find out everything you need to know about counterparty risk. 
Personal Finance
Risk Management Framework (RMF): An Overview
A company must identify the type of risks it is taking, as well as measure, report on, and set systems in place to manage and limit, those risks. 
Investing
Stock Market Risk: Wagging The Tails
The bell curve is an excellent way to evaluate stock market risk over the long term. 
Trading
Three Stocks Headed Into Longterm Buy Cycles
These beatendown S&P 500 components are finishing up longterm sell cycles that should yield strong multimonth bounces. 
Investing
Scenario Analysis Provides Glimpse Of Portfolio Potential
This statistical method estimates how far a stock might fall in a worstcase scenario.

What's the difference between a confidence level and a confidence interval in Value ...
Learn about the value at risk, how confidence intervals and confidence levels are used to interpret the value at risk and ... Read Answer >> 
What are some common measures of risk used in risk management?
Learn about common risk measures used in risk management and how to use common risk management techniques to assess the risk ... Read Answer >> 
What is backtesting in Value at Risk (VaR)?
The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Answer >> 
What is an original equipment manufacturer (OEM) in the automotive sector?
Learn more about OEM, VAR, and aftermarket manufacturers – and how they compete for customers. Explore industry trends that ... Read Answer >> 
What are the main risks associated with trading derivatives?
Learn about the primary risks usually associated with trading in the derivatives market, namely market, counterparty, liquidity ... Read Answer >>