Credit Value at Risk (Credit VaR) is defined as the Unexpected Loss (UL) at a given confidence level, which is the Worst-Case Loss (WCL) minus the Expected Loss (EL).

1. Calculate the Expected Loss (EL): Since the correlation is 1, the portfolio acts as a single large credit. Probability of default (PD) = 4% = 0.04 Exposure at default (EAD) = $4 million Loss given default (LGD) = 1 - Recovery Rate = 1 - 0 = 100% EL = PD \times EAD \times LGD = 0.04 \times \`4 \text{ million} \times 1 = \$0.16` \text{ million}`$2. **Calculate the Worst-Case Loss (WCL) at the 99% confidence level:** Since the correlation is perfectly positive (1.0), all 30 credits will either default together or survive together. There is a 4% probability that the entire portfolio defaults (resulting in a \$4` million loss) and a 96$0 loss). At the 99% confidence level (which falls within the 4% default tail), the maximum loss is the entire notional amount. $WCL = \$4` \text{ million}`$3. **Calculate the Credit VaR:** $Credit VaR = WCL - EL = \4` \text{ million} - \`0.16 \text{ million} = \$3.84` \text{ million}$