easy · FRM Part 1 Valuation and Risk Models
If a portfolio's Expected Shortfall is significantly higher than its Value-at-Risk, what does this suggest about the portfolio's risk profile?
- The portfolio has a high probability of small losses.
- The risk manager has used a very short look-back window in a historical simulation.
- The portfolio is subject to 'tail risk' or potentially catastrophic losses.
- The portfolio is highly diversified.
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