The use of expected shortfall (ES)is most appropriate when

Question

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Expected shortfall (ES) is more appropriate when there is a possibility of a "fat tail" loss, which means the probability distribution has an extreme event that is more likely to occur than what the normal distribution suggests. VAR assumes a normal distribution, which does not account for fat tail losses. ES is a better measure to estimate the potential loss of the portfolio beyond the VAR, especially during volatile market conditions.

The Use of Expected Shortfall (ES)is Most Appropriate When