Final answer:
The statement is true; Conditional Value-at-Risk (CVaR) does represent the expected loss given that the loss exceeds the threshold set by Value-at-Risk (VaR). CVaR accounts for both the likelihood and the magnitude of extreme losses, making it a more comprehensive risk measure.
Step-by-step explanation:
The statement that Conditional Value-at-Risk (CVaR) is the expected loss given that the loss exceeds Value-at-Risk (VaR) is true. CVaR, also known as Expected Shortfall, takes into account not only the probability of extreme losses (beyond the VaR threshold) but also the average of those losses. This risk measure provides a more comprehensive picture of the tail risk because it considers the size of the loss in the tail beyond the VaR cutoff point.
While VaR simply specifies the threshold at which a certain percentage of losses will not exceed, CVaR goes further to provide the average expected loss in the worst-case scenarios beyond that threshold. Thus, CVaR is particularly useful for risk managers who are focused on controlling potential extreme losses that could have significant financial impact on their portfolios.