Expected Shortfall & Conditional Value at Risk (CVaR) Explained

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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.

Опубликовано:

23 июл 2024

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Комментарии : 40

@RyanOConnellCFA 2 месяца назад

🎓 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/

@pipekans Месяц назад

I came for copper and found gold. Thank you for sharing your knowledge.

@RyanOConnellCFA Месяц назад

Really appreciate that Felipa! Thank you for your feedback

@ryszardsikorski6355 Месяц назад

Great explanations, please keep it up. Greetings from Poland.

@RyanOConnellCFA Месяц назад

Will do and thank you! Greetings from Texas in the US

@wisemintapp Месяц назад

This is fabulous!

@RyanOConnellCFA Месяц назад

Thank you Norman!

@pedromizutanif Месяц назад

Great video man!

@RyanOConnellCFA Месяц назад

I appreciate it!

@cristianjimenez3264 2 месяца назад

Awesome videos like always

@RyanOConnellCFA 2 месяца назад

I appreciate that Cristian!

@husseinarslan7173 2 месяца назад

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. However, within the depths of adversity, I nurtured a flicker of hope and ambition. At 17, a life-changing kidney transplant marked a turning point in my journey, infusing me with renewed determination and a sense of purpose. But the road to success was far from smooth. In the corridors of academia, I encountered the hurtful words of bullies and the isolating silence of indifference. Yet, I refused to be defined by my setbacks. Instead, I transformed them into stepping stones, each hurdle propelling me closer to my dreams. Today, as I reflect on the trials I've overcome, I am filled with gratitude for the resilience that sustained me. With unwavering support from loved ones, I navigated the darkest of nights, emerging stronger and more determined than ever. 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.

@husseinarslan7173 2 месяца назад

This is my stroy!

@RyanOConnellCFA 2 месяца назад

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

@husseinarslan7173 2 месяца назад

@@RyanOConnellCFA how can I talking with you? Do you have linkedlen?

@husseinarslan7173 2 месяца назад

@@RyanOConnellCFA I was failare in all topics at the school, From 3 years to 17 years old, in university the GPA not good.

@RyanOConnellCFA 2 месяца назад

@@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

@mgu5929 2 месяца назад

u r a beast my man, thx for the content 🙏🏻

@RyanOConnellCFA 2 месяца назад

Appreciate it! Its my pleasure

@fazirana123 2 месяца назад

very easy to follow . thanks for sharing your knowledge.

@RyanOConnellCFA Месяц назад

Glad it was helpful! It is my pleasure

@nenopower 2 месяца назад

Thanks for sharing, indeed a goldmine, keep it up, cheers.

@RyanOConnellCFA 2 месяца назад

Thank you for that! You can count on my consistent uploads 💪

@chikhimtang1219 2 месяца назад

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

@RyanOConnellCFA 2 месяца назад

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.

@hamidrezakamyabfar1829 Месяц назад

Thanks for sharing, It's my pleasure to find your channel. do you have or know any video to show the calculating VaR by ML models?

@PandaPong 2 месяца назад

Nice video!!!

@PandaPong 2 месяца назад

Credit risk made easy

@RyanOConnellCFA 2 месяца назад

Never thought I'd see you showing up in the comments Brian! Thank you

@RyanOConnellCFA 2 месяца назад

Also, its good to see you posting videos again. Keep it up!

@cary8039 2 месяца назад

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?

@RyanOConnellCFA Месяц назад

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.

@cupcakedcs2617 Месяц назад

Thanks for the valuable video! One question for the z score, in case of the one sided Var then z score for 95% is 1.65 yes, but in case of the two sides it is 1.96. Could you advise me why we are taking 1 side z score? Even though we do have two tails in the graph. I want to get the concept which z score that I need to take with what intend and what situation

@RyanOConnellCFA Месяц назад

Your understanding is on the right track. Value at risk is a one-sided measure. The purpose of VaR is to estimate the maximum potential loss in value of a portfolio over a specified period for a given confidence level. Since we are concerned only with potential losses (left side tail) and not gains (right side tail), we focus on the left side of the distribution.