FRM Glossary · Part II · Market Risk

Expected Shortfall (ES)

The average loss conditional on the loss exceeding the VaR threshold — a coherent, more sensitive tail-risk measure than VaR.

In more detail

Expected Shortfall (ES), also known as Conditional VaR (CVaR) or Average Value at Risk (AVaR), is the expected loss given that the loss is in the worst (1 − confidence) tail of the distribution. ES is a coherent risk measure (sub-additive, monotone, translation-invariant, positive-homogeneous) and is the basis of FRTB's internal models approach for market-risk capital. ES is more sensitive to the shape of the tail than VaR.