The 95% VaR can be found by finding the value that separates the 5% worst values of the returns distribution from the remaining distribution. This value will be the $[(1 - 95\%) \times 100 + 1]^{th}$ observation, i.e., $6^{th}$ observation after rearranging all the observations in ascending order.
[-32% -26% -24% -20% -19% -17% -14% -15% -12% -7%]
Thus, our observation of interest is -17%

Things to Remember

• Value at Risk (VaR) is a measure used to estimate the potential loss on an investment over a specific time period under normal market conditions.
• VaR is typically used by risk managers to quantify the level of financial risk within their firm's investment portfolio.
• Confidence level in VaR represents the probability that the actual loss will not exceed the VaR estimate.
• When calculating VaR, historical data on returns is often used to estimate potential losses at different confidence levels.
• The VaR calculation involves sorting historical returns in ascending order and identifying the observation that corresponds to the desired confidence level.