In a collective response to the highly inadequate risk-based capital requirement policies promulgated in the Basle Capital Accord in 1998, banking organizations have, over the past several years, begun in earnest to develop their own internal capital allocation systems. Since credit risk is a significant part of the overall risk faced by banking institutions, it also behaves these banks to develop their own internal credit risk models swiftly. These developments efforts eventually converged as one mandate that is now generally known as "risk-adjusted performance measurement", or RAPM. RAPM is considered by many risk managers to be the pinnacle of risk/return measurement and to represent the ultimate achievement for enterprise-wide risk management.
The main purpose of this study is to provide a brief introduction on risk-adjusted performance measurement using RAROC model. And also explains the concept of RAPM, and then describes in detail RAROC method for RAPM.
This thesis examines RAROC method by using "K" bank 's Seoul branches portfolio and compares traditional performance measurement.
