Conditional VaR (CVaR)

Conditional Value at Risk (CVaR) is a financial risk measure that estimates the expected loss of an investment in the worst-case scenarios beyond a certain threshold. While Value at Risk (VaR) tells you the maximum loss you might face at a given confidence level, CVaR provides insight into the severity of losses that could occur if that threshold is exceeded. Essentially, it helps investors understand not just how much they might lose, but also the potential size of losses in extreme unfavorable conditions, aiding in better risk management and decision-making.