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@vaquezartup365 Жыл бұрын
Check out this question A bank is planning to make a loan of 5million to a steel firm. It expects to charge an upfront fee of 1.5% and a servicing fee of 50 basis points. The loan has a maturity of 8 years and a duration of 7.5 years. The cost of funds(the RAROC benchmark) for the loan is 10%. Assume that the bank has estimated that the maximum change in the risk premium on the steel manufacturing sector to be approximately 4.2% based on two years of historical data. The current market interest rate for loans in this sector is 12% Using Raroc model should the bank make the loan.
@mogtrader812 жыл бұрын
Your videos make it to understand and learn a lot better. What's the difference between RAROC and ADJUSTED RAROC? Thanks.
@vikramrajiyer9 ай бұрын
Shouldn't we also subtract the cost of economic capital from the numerator?
@tafadzwatongs49324 жыл бұрын
Thnk u so much ...it was helpful..how about if we are given tax
@sgpleasure3 жыл бұрын
Multiply numerator by (1-tax rate)
@rajeshanand32636 жыл бұрын
In one word can we say that RAROC signifies earnings over and above the risk free rate on the deployment of same capital. or is it too simplistic way of saying.
@julioautomation133211 жыл бұрын
Thanks you very much. Please, could you add the Excel file please ?
@Geotubest15 жыл бұрын
Well done. Enjoyed this very much.
@ComfortableLate14 жыл бұрын
what about cost of capital? should it be an expense too?
@sgpleasure3 жыл бұрын
Per De Laurentis' formula , also subtract COF from the numerator
@mobilbear5 жыл бұрын
this is very useful, thanks a lot dude!
@bionicturtle13 жыл бұрын
@joserodriguez33ucv Thanks for your support, we love it!
@joserodriguez33ucv13 жыл бұрын
Great job my friend!! Thank you very much.
@dabarose10 жыл бұрын
thank u for this video, it helped a lot!
@cyphi111 жыл бұрын
Can I borrow $1?
@支海朝5 жыл бұрын
This is amazing. Actually l think the example in frm handbook (6th edition) page 678-679 is problematic given that the deposit is 925m and the loan investment is 1000m. They are simply not matching.
@eaglemars61235 жыл бұрын
It is closer to reality though. Having identical loan and depo exposures is not typical in real life.
@WildHorseProductions8 жыл бұрын
Government securities returning 6.5% ? Bahahahahaha, oh how times have changed since 2008