When assessing tail risk by looking at the 5% worst-case scenario, the most realistic view of downside exposure would be
A) expected shortfall.
B) value at risk.
C) conditional tail expectation.
D) expected shortfall and value at risk.
E) expected shortfall and conditional tail expectation.

Question

Quizplus · Accepted Answer

Expected shortfall and conditional tail expectation are essentially the same concept, both providing a measure of the average loss in the worst-case scenarios (e.g., the worst 5% of cases). They offer a more comprehensive view of tail risk than value at risk (VaR), which only indicates the threshold of loss that will not be exceeded with a certain confidence level but does not provide information on the severity of losses beyond that threshold.

When Assessing Tail Risk by Looking at the 5% Worst-Case