Financial Risk Manager Part 2
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A risk assessment professional at a financial institution has been assigned the task of evaluating the institution's current risk assessment methodologies. The institution primarily relies on Value at Risk (VaR) as its main metric for risk assessment. However, the professional believes that Expected Shortfall (ES) may be a more effective metric, especially during periods of market turbulence. Considering the comparison between VaR and ES, which of the following statements is true?
A
When estimating ES and VaR at the same confidence level, ES will always be greater than VaR.
B
If a VaR model backtest at a specified confidence level accepts the model, then the corresponding ES model will also be accepted.
C
While VaR ensures that the estimate of portfolio risk is less than or equal to the sum of the risks of that portfolio's positions, ES does not.
D
While ES is more difficult to estimate than VaR, it is easier to backtest than VaR.