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Need help on figuring out how to arrive at this answer. I understand how to get the expected return in the first part of the
Need help on figuring out how to arrive at this answer. I understand how to get the expected return in the first part of the question, I just need help figuring out the rest of the problem. Thanks!
Q: 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?
A: 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).
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