Expected Shortfall
Expected shortfall is the average loss beyond VaR — a coherent tail measure that asks how bad the bad days are.
Definition
Expected Shortfall refers to a coherent tail measure that asks how bad the bad days are. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
It shows up in factor research, attribution, and capacity debates — whether a return slice is skill, style, or fee drag. When a coherent tail measure that asks how bad the bad days are shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what expected shortfall is saying. If a coherent tail measure that asks how bad the bad days are moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Check definition stability across universes, costs, and regimes before treating a backtest as portable. Prefer a short written null hypothesis for Expected Shortfall: what would falsify the current reading in the next window?