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Finance & Banking vocabulary · Risk Management

Expected shortfall

Meaning in finance & banking, with examples

nounAdvanced term

In finance & banking, expected shortfall means: The average loss in the worst part of a modeled loss distribution beyond a chosen confidence level.

In Turkish: beklenen kuyruk kaybı

How it is used

State the horizon, confidence level and model; this is a tail average, not a maximum possible loss.

Example sentences

  1. Expected shortfall increased when the model assigned heavier losses to extreme scenarios.

    The measure responds to the size of losses in the tail.

  2. The report compared expected shortfall across portfolios using the same horizon.

    A consistent horizon makes the estimates more comparable.

Common collocations

  • expected shortfall estimate
  • expected shortfall model
  • market riskThe risk of losses caused by changes in market prices, such as interest rates, exchange rates, share prices and commodity prices.
  • stress testAn analysis that checks whether a bank would have enough capital and liquidity to survive a severe but possible shock, such as a deep recession.

More terms: Risk Management

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This page explains English vocabulary for learners. It is not financial advice.