Expected Shortfall & Conditional Value at Risk (CVaR) Explained
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- čas přidán 31. 05. 2024
- Unlock the secrets of financial risk management with Ryan O'Connell, CFA, FRM, as he dives deep into Expected Shortfall, Conditional Value at Risk (CVaR), and Value at Risk (VaR). Discover why Expected Shortfall is a crucial metric for assessing tail risk and how it compares to the broader applications of CVaR and VaR in risk analysis. Learn practical skills with step-by-step tutorials on calculating VaR and Expected Shortfall using Excel, tailored for finance professionals seeking robust risk assessment tools. This comprehensive guide ensures you master Expected Shortfall and understand its significance in minimizing financial risks.
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Chapters:
0:00 - Why is Expected Shortfall & CVaR Important?
0:57 - Value at Risk (VaR) Explained
3:40 - Expected Shortfall & Conditional VaR Explained
5:46 - Calculate Return & Standard Deviation in Excel
8:10 - Calculate Value at Risk (VaR) in Excel
9:46 - Calculate Expected Shortfall in Excel
*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.
🎓 Tutor With Me: 1-On-1 Video Call Sessions Available
► Join me for personalized finance tutoring tailored to your goals: ryanoconnellfinance.com/finance-tutoring/
💾 Download Free Excel File:
► Grab the file from this video here: ryanoconnellfinance.com/product/expected-shortfall-value-at-risk-calculator-in-excel/
This is fabulous!
Thank you Norman!
Thanks for sharing, indeed a goldmine, keep it up, cheers.
Thank you for that! You can count on my consistent uploads 💪
very easy to follow . thanks for sharing your knowledge.
Glad it was helpful! It is my pleasure
u r a beast my man, thx for the content 🙏🏻
Appreciate it! Its my pleasure
Awesome videos like always
I appreciate that Cristian!
Goldmine for practical things 🫶🏻
Thank you for that Nikhil!
From my earliest years until I turned 18, I grappled with self-doubt and academic challenges. Despite my best efforts, subjects like math, English, and physics remained elusive to me throughout my school years. Yet, amidst these struggles, a greater trial awaited: from ages 10 to 17, I underwent the taxing ordeal of dialysis.
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My journey, though marked by challenges, is a testament to the power of perseverance and the resilience of the human spirit. And as I set my sights on a career in finance, particularly in pursuing my dream of becoming a CFA, I do so with a heart full of hope and a steadfast belief in the boundless possibilities that lie ahead.
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Hussein that was very poetic and it is cool to hear your story! I wish you the best of luck as you pursue the CFA. You will crush it after what you have been through
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From 3 years to 17 years old, in university the GPA not good.
@@husseinarslan7173 The CFA is a different animal than university! It is you against the world in the CFA since you do it all alone. Perhaps you will struggle in that environment as well. But try to see if you can adopt a mentality that will carry you through the CFA
Just to clarify, for expected shortfall, is the only way to do it via historical returns? Was just thinking about this because for VaR you were using parametric method but for expected shortfall you took the history of the returns
Hi @chikhimtang1219, great question! Expected Shortfall (ES) or Conditional Value at Risk (CVaR) can indeed be calculated using historical returns, as shown in the video, but that's not the only method. You can also use the parametric method or Monte Carlo simulations to estimate ES. In the video, I used historical returns to provide a clear, practical example by averaging the worst outcomes below the VaR threshold. Each method has its nuances, so choosing one depends on the specific requirements of your analysis and the data available.
Nice video!!!
Credit risk made easy
Never thought I'd see you showing up in the comments Brian! Thank you
Also, its good to see you posting videos again. Keep it up!
Ryan: Using your spreadsheet SPY data, how would I calculate the expected shortfall for a one-week holding period rather than a one-day holding period? Is there a way to make your spreadsheet calculate the expected shortfall for SPY based on different holding periods input by the user?
Hey there. To calculate the expected shortfall for a one-week holding period, you can modify the spreadsheet to use weekly returns instead of daily returns. First, calculate the weekly returns by using the formula: (Price_t / Price_t-5) - 1, where Price_t is the closing price on day t, and Price_t-5 is the closing price 5 trading days prior. Then, sort the weekly returns from lowest to highest and determine the VaR levels for your desired confidence intervals based on the sorted data. Finally, calculate the expected shortfall by averaging all the weekly returns that fall below the respective VaR levels for each confidence interval.
To make the spreadsheet more user-friendly and flexible, you can add an input cell where users can enter their desired holding period (e.g., 5 for one week, 21 for one month, etc.). Modify the return calculation formula to use the user-defined holding period instead of a fixed value, like this: (Price_t / Price_t-holdingPeriod) - 1. Ensure that the rest of the calculations (sorting, VaR levels, expected shortfall) reference the returns based on the user-defined holding period. This way, the spreadsheet will automatically calculate the expected shortfall for SPY based on the holding period specified by the user, making it a versatile tool for analyzing risk over various time frames.