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What Is Raroc? |
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Answer» RAROC is a risk-adjusted framework for profitability measurement and profitability MANAGEMENT. It is a tool for measuring risk-adjusted financial performance. And it provides a uniform view of profitability across businesses (Strategic Business Units / divisions). RAROC and related CONCEPTS such as RORAC and RARORAC are MAINLY used within (business lines of) banks and INSURANCE companies. RAROC is defined as the ratio of risk-adjusted return to economic capital. RAROC is a risk-adjusted framework for profitability measurement and profitability management. It is a tool for measuring risk-adjusted financial performance. And it provides a uniform view of profitability across businesses (Strategic Business Units / divisions). RAROC and related concepts such as RORAC and RARORAC are mainly used within (business lines of) banks and insurance companies. RAROC is defined as the ratio of risk-adjusted return to economic capital. |
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