how can expected shortfall be calculated when VAR is given? explain with an example.
shubhangini swarnkarBeginner
How to calculate Expected shortfall from VAR? Please explain with an example.
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You may just know the concept and not the calculation.
Still let me explain….
There are 100 profits and losses on a portfolio arranged from worst to best…
These are -30m, -28m, -25m, -24m, -20m, -19m etc…
So 95% VAR is the 5th worst loss ie 20million loss
Expected shortfall is the average loss beyond VAR
=( 30+ 28+ 25+ 24)/4
= 26.75m
Thank you..