Risk-Adjusted Return and Economic Capital

These pages explain how banks allocate capital to risk and compare business performance after adjusting for expected and unexpected losses.

In this section

• Economic Capital (EC): Definition, Calculation, and Examples
  A comprehensive guide to understanding Economic Capital (EC), its calculation, and relevant examples. Explore how financial services firms determine the necessary capital to stay solvent based on their risk profile.
• RAROC
  RAROC measures risk-adjusted return on capital for business lines, loans, portfolios, or financial institutions.
• Risk-Adjusted Return on Capital: The Generic Idea Behind RAROC-Style Performance Measures
  Risk-Adjusted Return on Capital is a finance-focused reference term for regulation, risk, capital, or market analysis.