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Risk Adjusted Return on Capital: An Analysis of the Role of RAROC Index as a standardization Instrument in mortgage Credit
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Orientador(es)
Resumo(s)
RAROC is defined as a risk-adjusted profitability measurement and management metric
designed to measure risk-adjusted financial performance and provide a consistent view of
business profitability. This dissertation evaluates the relevance of applying the Risk-Adjusted
Return on Capital (RAROC) model to the performance evaluation and analysis of a mortgage
loan portfolio, based on a real-world dataset from Banco S, including more than 7,000
anonymized loan contracts granted between 2017 and 2024, the full period of mortgage
lending activity since the bank's recent entry into the market. This analysis aims to determine
whether the return on each contract justifies the capital allocated to support its credit risk.
The RAROC framework, widely used in risk-sensitive performance management, serves as a
fundamental tool for assessing the adequacy of returns, considering default risk, expected
loss, capital costs, and other operating expenses. The methodology applied in this analysis
involves calculating the risk-adjusted return for each contract based on current financial and
risk indicators.
Descrição
Dissertation presented as the partial requirement for obtaining a Master's degree in Statistics and Information Management, specialization in Risk Analysis and Management
Palavras-chave
RAROC Banking Performance Metrics Mortgage Credit Credit Risk Economic Capital SDG 8 - Decent work and economic growth SDG 10 - Reduced inequalities SDG 11 - Sustainable cities and communities