Risk Adjusted Return on Capital

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).
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
Copyright © 2003-2025 Farlex, Inc Disclaimer
All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional.