Measure the average loss in the tail beyond value at risk, the risk measure regulators prefer.
Expected shortfall averages the losses in the tail rather than marking its edge, so it is always larger than VaR. Unlike VaR it is a coherent risk measure, which is why Basel moved to it for market risk capital. VaR can be gamed by pushing risk just beyond the threshold; expected shortfall cannot, because it prices the whole tail.
Expected Shortfall
Expected shortfall = volatility × φ(z) ÷ (1 − confidence), with φ the normal density at z
Expected shortfall = volatility × φ(z) ÷ (1 − confidence), with φ the normal density at z Expected shortfall averages the losses in the tail rather than marking its edge, so it is always larger than VaR. Unlike VaR it is a coherent risk measure, which is why Basel moved to it for market risk capital.
VaR can be gamed by pushing risk just beyond the threshold; expected shortfall cannot, because it prices the whole tail.
This calculator takes 4 inputs: Portfolio value, Annual volatility, Horizon, Confidence level. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.