Subject category:
Economics, Politics and Business Environment
Published by:
IESE Business School
Version: 11/21/03
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Abstract
The case demonstrates the method used by banks to model risk associated with their loan portfolio. The model consists of two parts: the first calculates RAROC (Risk Adjusted Return on Capital) and the second part models the risk and return associated with the whole portfolio of loans assuming that part of the default risk is correlated, to take into account common factors affecting risk, in this case the economy.
Location:
Other setting(s):
2003
Subject category:
Economics, Politics and Business Environment
Published by:
IESE Business School
Version: 11/21/03
Length: 5 pages
Data source: Field research
About
Abstract
The case demonstrates the method used by banks to model risk associated with their loan portfolio. The model consists of two parts: the first calculates RAROC (Risk Adjusted Return on Capital) and the second part models the risk and return associated with the whole portfolio of loans assuming that part of the default risk is correlated, to take into account common factors affecting risk, in this case the economy.
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Location:
Other setting(s):
2003
Related
Subject category:
Economics, Politics and Business Environment
Published by:
IESE Business School
Version: 11/21/03
Length: 5 pages
Data source: Field research