What is CVaR, Conditional Value at Risk?
Unfortunately, the term is not used consistently by all authors. Conditional value at risk (cvar) is most often used to refer to a measure of the risk of loss beyond the VaR. I.e., if the VaR of a portfolio is DM 5,000, then what is the expected loss beyond DM 5,000 (or “mean excess loss”), given that an observed loss is greater than the VaR. However, some use the term to mean the estimation of VaR from “conditional” asset return distributions (a conditional distribution is one that takes into account changes in the shape of the distributions through time).
