Entropic value at risk
What is entropic value at risk?
This is a coherent risk measure that was first introduced in 2011. It uses a concept known as the Chernoff bound and is designed to tackle inefficiencies in the theory of conditional value at risk.
Where have you heard about entropic value at risk?
You might have heard of it if you've studied financial mathematics. It's one of many different risk measures that have been put forward to try and quantify the risk involved in a random outcome or position.
What you need to know about entropic value at risk.
It was put forward by Amir Ahmadi-Javid, a professor at Tehran Polytechnic university, in 2011. He developed a number of coherent risk measures known as g-entropic risk measures. Entropic value at risk corresponds to the upper bound for value at risk and the conditional value at risk, both of which are obtained from the Chernoff inequality. Entropic value at risk can also be represented using the concept of relative entropy.
Find out more about entropic value at risk.
To learn more about this type of concept, check out our guide to entropic risk measure.