CategoryHierarchies.com

Expected Shortfall is a risk metric that quantifies the average loss that a financial institution or investment portfolio is expected to incur in the event of a severe market downturn, beyond a certain confidence level. It is calculated by taking into account the potential losses that exceed a specified threshold level, weighting them by their probabilities, and averaging them to provide a comprehensive measure of potential risk. This metric is used by risk managers and investors to assess the potential downside risk of their investments and make more informed decisions to protect their portfolios from extreme losses.