A quantitative measure that is used to estimate the credit risk of a credit portfolio (e.g., a bond portfolio). It captures the difference between expected and unexpected losses on a credit portfolio over a period of one year, expressed at a specific level of statistical confidence.
The “unexpected credit loss” is the difference between the expected value of the return/ payoff on the portfolio and an extreme loss percentile. For example, subject to the loss percentile, the loss may be estimated to have no more than 1.0% probability of occurrence in the next year.
It is known for short as CVaR.
