Expected Shortfall (CVaR) 95% and 99%: practical guide

What CVaR 95% and 99% mean

Expected Shortfall (CVaR) estimates the average loss in the worst tail beyond the VaR threshold.

$CVaR_c = -E[R \mid R \le Q_{1-c}(R)]$

Quick example

On a $100,000 portfolio:

• VaR 95% = $2,100
• CVaR 95% = $3,000

Interpretation: when losses go beyond the 95% VaR threshold, average loss is closer to $3,000, not $2,100.

Why CVaR matters

• VaR gives a cutoff point.
• CVaR describes what happens after that cutoff.

For fat-tail markets, CVaR usually gives a more realistic downside view.

Practical use

• Compare allocations with similar expected return but different tail risk.
• Set risk limits on CVaR, not only volatility.
• Combine with drawdown to monitor both tail events and path risk.

Next step

• Review your risk profile in the Wallible app
• Compare scenarios in portfolio backtesting
• Read related guides: VaR 95%/99% , Recovery Factor , Maximum Drawdown