A one-year project has a 98% chance of leading to a gain of $2 million, a 1.5% chance of leading to a loss of $4 million and a 0.5% chance of leading to a loss of $10 million. The cumulative loss distribution is shown in Figure 12.3. The point on this cumulative distribution that corresponds to a cumulative probability of 99% is $4 million. It follows that VaR with a condence level of 99% and a one-year time horizon is $4 million