Answer: CVaR of Loan S > CVaR of Loan U > CVaR of Loan T

## Explanation When the 95th percentile Worst Case Loss (WCL) is the same for all three loans, the comparison of Conditional Value at Risk (CVaR) depends on the tail behavior beyond the VaR threshold. CVaR (also known as Expected Shortfall) measures the average loss in the worst 5% of cases. If all loans have the same 95th percentile WCL (VaR), then: - **Loan S** likely has the heaviest tail risk, meaning losses beyond the 95th percentile are more severe on average - **Loan U** likely has moderate tail risk - **Loan T** likely has the lightest tail risk Therefore, the ordering would be: **CVaR of Loan S > CVaR of Loan U > CVaR of Loan T** This corresponds to option A, which correctly identifies that Loan S has the highest CVaR (most severe tail losses), followed by Loan U, with Loan T having the lowest CVaR.

Author: LeetQuiz .