Risk glossary

 

Credit value-at-risk (CVaR)

The CVaR of a portfolio is the worst loss expected to be suffered due to counterparty default over a given period of time with a given probability. The time period is known as the holding period and the probability is known as the confidence interval. CVaR is not an estimate of the worst possible loss, but the largest likely loss.

For example, a company might estimate its CVaR over 10 days to be $100 million with a confidence interval of 95%. This would mean there is a one-in-20 (5%) chance of a loss larger than $100 million in the next 10 days.

* see also value-at-risk (VaR)

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