Expected shortfall (ES, FRM T5-02)

In this video, I'm going to show you exactly how we calculate expected shortfall under basic historical simulation. Expected shortfall is both desirable and timely. It's desirable because it is coherent, satisfies all four conditions of coherence, including subadditivity, whereas var does not. Second, it's timely because you may know that in Basel IV, specifically fundamental review the trading book VaR is being replaced by expected shortfall. So previously, this was more perhaps of academic interest and it is now popular and practical.

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Financial Markets and Products: Intro to Derivatives (FRM Topic 3, Hull Ch 1-7)
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Valuation and Risk Models (FRM Topic 4)
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Credit Risk (FRM Topic 6)
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