Exam 9: VaR identifies a quantile, while tail measures look beyond it
For a stated loss distribution, VaR is a quantile. A tail measure such as expected shortfall describes losses beyond a specified tail threshold under its definition. Neither is a universal synonym for “worst possible loss.”
Worked example or practice scenario
For a continuous uniform loss on 0 to 100, 95% VaR is 95. Expected shortfall at 95% is the mean of the upper 5%, or 97.5. For discrete distributions, the treatment of probability mass at the boundary requires care.
Try this next
Draw the distribution and shade the tail. Explain what information each measure discards. State the confidence level, horizon and loss definition before comparing two capital measures.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.
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