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Conditional Value at Risk (CVaR)

The average loss on the bad days beyond the VaR threshold — the size of the tail.

Conditional Value at Risk, also called Expected Shortfall, answers the question VaR ignores: when you do breach the VaR threshold, how bad is it on average? CVaR is the mean loss across all the outcomes worse than VaR, so it measures the depth of the tail rather than just its edge.

Because it accounts for extreme losses, CVaR is generally the more conservative and better-behaved risk measure for fat-tailed assets like crypto. A strategy with the same VaR as another but a much larger CVaR is hiding nastier tail events.

Formel

CVaR_α = average loss given that the loss exceeds VaR_α

Beispiel

Two strategies share a 95% VaR of 3%, but one has a CVaR of 4% and the other 9% — the second has far heavier tail risk.

Wie Noon Barbari Conditional Value at Risk (CVaR) nutzt

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See risk metrics in noonbarbari

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