VAR

bigwilly Wrote: ------------------------------------------------------- > ^ Tail-Value AT Risk which is the Average of the > losses in the tail or something like that. yeah basically it is a CDF of a tail

TVAR = VAR + avg of all possible VAR losses in tail…

CSK, It probably wasn’t the best choice of words to use in the question. But I think we will have to agree to disagree on this one :slight_smile:

bigwilly Wrote: ------------------------------------------------------- > CSK, It probably wasn’t the best choice of words > to use in the question. But I think we will have > to agree to disagree on this one :slight_smile: will but that IS very important, as i see this kind of questions all over the schweser :-/

But as i stated above, this is exactly WHY I HATE T/F questions and the Correct/Incorrect questions that CFAI uses to disguise T/F questions. Its so interpretive to the words used. One word can make the statement true or false. 1 stupid word.

bigwilly Wrote: ------------------------------------------------------- > But as i stated above, this is exactly WHY I HATE > T/F questions and the Correct/Incorrect questions > that CFAI uses to disguise T/F questions. Its so > interpretive to the words used. One word can make > the statement true or false. 1 stupid word. i agree, but i feel very strongly towards schweser not being EXACT in their questions. I am sure such ambiguity wouldnt show up anywhere on a legal contract

csk, the first one is false, as the first part of the first statement is wrong. At the end of the day, it all depends on what is probability of loss. And I would use the most natural definition: P(R<0). VaR only gives a quantile of a distribution, it cannot gives the probability of loss, unless you can run the function VaR many times and find the alpha such that VaR_alpha = 0 where that alpha is the probability of loss. Otherwise if we are only given VaR at alpha = 5%, we can never deduce the probability of loss from there.

And I think TVAR is better known as CVaR.

No CVAR Is Credit Value at Risk which is Upper Tail…Tail-Value At Risk is Lower Tail, same tail as VAR.

its a terrible question, it all depends on how you interpret “amount that can be lost in the below”. Is that implying max loss or not. I read it how it is and it only says the amount that can be lost, so I’m leaning with CSK but it is a poor question. VAR tells the probability of loss as well as the amount that can be lost

CVaR in portfolio management means conditional value-at-risk, as it’s better behaved in optimization, it’s easier to use than VaR both in objective function and constraints. Well, that’s not CFA convention so I never to brainwash myself

^My bad Fred. I think I do actually remember Stalla mentioning that in its reading that CVAR is Credit not Conditional…

Also remember it doesn’t tell you that amount that CAN be lost. It tells you either the Minimum Amount that Can be lost (using 5%) or the Maximum amount that Can be lost (using 95%)