The Conditional Tail Expectation measures the average of losses above
the Value at Risk for some given confidence level, that is $E[X|X
> VaR(X)]$ where $X$ is the loss random variable. CTE
is a generic function with, currently, only a method for
objects of class "aggregateDist"
.
For the recursive, convolution and simulation methods of
aggregateDist
, the CTE is computed from the definition
using the empirical cdf.
For the normal approximation method, an explicit formula exists:
$$\mu + \frac{\sigma}{(1 - \alpha)} \sqrt{2 \pi}
e^{-\mathrm{VaR(X)}^2/2},$$
where $\mu$ is the mean, $\sigma$ the standard
deviation and $\alpha$ the confidence level.
For the Normal Power approximation, the CTE is computed from the
definition using integrate
.