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State the modeled quantity
Let L represent loss over one common horizon. Positive values are losses; negative values are gains. This original model assumes L is normal with mean 0 and standard deviation 10 loss units. The assumption is declared, not fitted to market data.
Keep location and scale separate
| Field | Value |
|---|---|
| Mean loss | 0 loss units |
| Standard deviation | 10 loss units |
| Distribution | Declared normal law |
| Horizon | One stated hypothetical period |
| Confidence | 95% |
| Estimation status | Original assumptions |
Read the original tail measures
The 95% standard normal quantile is about 1.644854. Model VaR is 16.448536 loss units and expected shortfall is 20.627128. The latter averages the selected worst 5% of the continuous distribution.
Check the missing empirical evidence
A valid formula does not establish normality or estimate the inputs. Record observations, exposure basis and estimation method before using an empirical claim. The normal law also has unbounded support; a finite chart window is not the end of possible model outcomes.