ERM Glossary: Risk adjusted return on capital (RAROC)

[this page | pdf | references | back links]

Risk adjusted return on capital (RAROC) is an adjustment to traditional return on capital that accounts for risk.

For example, it might for a bank be calculated as:

where:

There are various similar definitions for different industry types, the important element being that all include some adjustment for risk.

NAVIGATION LINKS
Contents | Prev | Next