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Expected Shortfall as a Tool for Financial Risk Management

Carlo Acerbi·Claudio Nordio·Carlo Sirtori
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Abstract

We study the properties of Expected Shortfall from the point of view of financial risk management. This measure --- which emerges as a natural remedy in some cases where Value at Risk (VaR) is not able to distinguish portfolios which bear different levels of risk --- is indeed shown to have much better properties than VaR. We show in fact that unlike VaR this variable is in general subadditive and therefore it is a Coherent Measure of Risk in the sense of reference (artzner)

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Carlo Acerbi, Claudio Nordio, Carlo Sirtori. 2001-02-16. Expected Shortfall as a Tool for Financial Risk Management. https://arxiv.org/abs/cond-mat/0102304

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