Hey all!
I assume that guys in Asset Management knows something about RAROC. (Risk-adjusted return on capital) Expect return/ VaR
How does your firm implement RAROC ? or allocate VaR in relation with expect returns. What is a good RAROC ratio on a position or a portfolio ?
I would appreciate any insight you guys may have into this.
A lot of the DCM guys use RAROC too. Banks look at RAROC when they lend so anyone doing relationship lending would use it
Should RAROC calculation include capital benefits? (Originally Posted: 01/10/2018)
Hi all!
Quick question on RAROC calculation.
In the real life, do banks include capital benefits in the numerator of RAROC?
If so, they are assuming that the entire operation is being funded with debt (ie without capital). If not, they are assuming that the operation is being funded both with debt and with capital. In the latter, where should one compute the capital gains from the liquidity buffer?
Many thanks
André
In voluptatem aut qui praesentium assumenda adipisci. Nisi temporibus repellendus quidem accusamus animi. Expedita enim atque ullam impedit nihil. Provident qui ad veritatis culpa fuga.
Consequuntur enim hic in fuga error incidunt voluptas nobis. Fugit sit aspernatur fuga consectetur et officia aliquid.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...