In this class we first consider an exercise involving the practical computation of Value-at-Risk. We will solve it step-by-step together, hence get ready with paper and pencil! I want you to be able to really use what we learn together!

Then we introduce some special VaRs, that is the mean-VaR, and the VaR under specific theoretical distributions, such as the Normal distribution.

We then present the Expected Shortfall (ES), as the risk measure that answers the following question: “If things go bad, what is the expected loss?”.
The ES is always defined with respect to a quantile, hence, in the case of risk management, with respect to the VaR.

Here you can find the slides of this class. And here the script.

In the short video here below, I want to show you how we can use R to easily compute Value-at-Risk. More detailed and complex examples will be discussed when we have the necessary knowledge to actually use C-VaR. I strongly suggest you to watch this video in fullscreen mode.

Here the script. Here the data used in the video.