Risk Adjusted Return on Capital
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Risk Adjusted Return on Capital
A measure of the profitability of an investment or business after accounting for its risk. This can help inform one's investment decisions. It is calculated as follows:
RAROC = ( revenue - expenses - expected loss + income from capital invested ) / capital
It should be noted that an investment's RAROC has become a less common measure than the risk adjusted return on risk adjusted capital (RARORAC).
RAROC = ( revenue - expenses - expected loss + income from capital invested ) / capital
It should be noted that an investment's RAROC has become a less common measure than the risk adjusted return on risk adjusted capital (RARORAC).