Answer-first summary for fast verification
Answer: USD 17 million
## Explanation Conditional VaR (CVaR), also known as Expected Shortfall, is the average of all losses that exceed the VaR level. **Given:** - VaR at 99th percentile = USD 8 million - Losses beyond VaR level: USD 9, 10, 11, 13, 15, 18, 21, 24, 32 million **Calculation:** CVaR = Average of all losses beyond VaR level Sum of losses beyond VaR = 9 + 10 + 11 + 13 + 15 + 18 + 21 + 24 + 32 = 153 million Number of observations beyond VaR = 9 CVaR = 153 / 9 = USD 17 million **Key Points:** - CVaR provides the expected loss given that the loss exceeds the VaR level - It's calculated as the simple average of all losses in the tail beyond the VaR threshold - With 1,000 days of data and 99% VaR, we expect 10 worst-case scenarios (1% of 1,000), but only 9 are provided in this case - The CVaR of USD 17 million represents the average loss on the worst 0.9% of days
Author: LeetQuiz .
Ultimate access to all questions.
No comments yet.
A market risk manager uses historical information on 1,000 days of profit/loss information to calculate a daily VaR at the 99th percentile, of USD 8 million. Loss observations beyond the 99th percentile are then used to estimate the conditional VaR. If the losses beyond the VaR level, in millions, are USD 9, USD 10, USD 11, USD 13, USD 15, USD 18, USD 21, USD 24, and USD 32, then what is the conditional VaR?
A
USD 9 million
B
USD 32 million
C
USD 15 million
D
USD 17 million