Risk Measures, VaR, and Volatility
Free GARP FRM Part I lesson in Valuation and Risk Models. 21 min read, ~3,133 words.
VaR answers "what's the worst loss at confidence level c over horizon h?" Parametric VaR assumes returns are normal: on a P&L basis. Expected Shortfall (ES) is the average loss conditional on exceeding VaR. ES VaR at the same confidence level. ES is coherent; VaR is not. Coherent risk measures...
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What this lesson covers
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- Example 1
- Example 2
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