Suppose you invest in a product whose returns follow a uniform distribution between −40% and

+60%. What is the expected return? What is the 95% VaR? The expected shortfall?

Answer:

The expected return is +10%. The 95% VaR is 35% (i.e., 5% of the returns are expected to be

worse than –35%). The expected shortfall is 37.5% (again the negative is implied).

Can you please explain how the 95% VAR is calculated?