medium · Quantitative Finance
What is the primary limitation of Value at Risk (VaR) that is addressed by the use of Expected Shortfall (ES)?
- VaR is too difficult to calculate for non-normal distributions.
- VaR ignores the mean return of the portfolio.
- VaR does not satisfy the subadditivity property of a coherent risk measure.
- VaR cannot be used for portfolios containing derivatives.
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