easy · Quantitative Finance qf-core
What is the primary limitation of Value at Risk (VaR) that is addressed by the use of Expected Shortfall (ES)?
- VaR is hard to compute exactly for non-normal return distributions.
- VaR completely fails to account for the portfolio's average expected return.
- VaR does not satisfy the subadditivity property of a coherent risk measure.
- VaR simply cannot be applied to any portfolio that contains options or other derivatives.
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