Market risk charge tells us the average of the losses in the tail of the distribution beyond the 99th percentile.

Question

Quizplus · Accepted Answer

Market risk charge is related to the potential loss in value of an investment due to movements in market factors, but it does not specifically describe the average of losses beyond the 99th percentile. That description more closely aligns with Value at Risk (VaR) or Expected Shortfall (ES) concepts, which measure potential losses at certain confidence levels, with ES specifically focusing on the average loss in the tail beyond a certain percentile.

Market Risk Charge Tells Us the Average of the Losses