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Risk

Expected shortfall (ES)

The average loss in the worst cases beyond the Value at Risk threshold, a measure of tail risk.

Expected shortfall, also called conditional VaR, answers what VaR leaves out: given that losses exceed the VaR level, how bad are they on average. It looks squarely at the tail.

Because it captures the size of extreme losses, regulators have moved market risk capital from VaR toward expected shortfall.

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