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A large commercial bank is using VaR as its main risk measurement tool. Expected shortfall (ES) is suggested as a better alternative to use during market turmoil. What should be understood regarding VaR and ES before modifying current practices?
A
Despite being more complicated to calculate, ES is easier to backtest than VaR.
B
Relative to VaR, ES leads to more required economic capital for the same confidence level.
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
Both VaR and ES account for the severity of losses beyond the confidence threshold.
