What is RAROC?
RAROC is a risk-adjusted structure for earnings statistic and earnings control. It is a device for calculating risk-adjusted financial efficiency. And it provides a consistent view of earnings across companies (Strategic Company Systems / divisions). RAROC and relevant principles such as RORAC and RARORAC are mainly used within (business collections of) financial institutions and insurance providers. RAROC is determined as the rate of risk-adjusted come back to financial investment.
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