Difference between revisions of "Risk-Adjusted Return on Capital"
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Latest revision as of 16:37, 1 August 2018
Definition
Risk-adjusted Return on Capital (RAROC) denotes a profitability measurement metric (and associated framework) for analysing financial performance in business models involving the explicit underwriting of risk (banking, insurance etc). RAROC is defined as the ratio of expected return to Economic Capital
Usage
RAROC metrics can be used to aid assessment of individual transactions or the performance of entire portfolios or business lines.
