# RAROC

*Risk & Portfolio — Finicade finance glossary*

Risk-adjusted return on capital — profit measured against the economic capital a business ties up to cover its risks. It lets a bank compare a safe desk and a wild one on the same footing.

**Related terms:** [Economic Capital](https://finicade.com/glossary/economic-capital), [Sharpe Ratio](https://finicade.com/glossary/sharpe-ratio), [Value at Risk (VaR)](https://finicade.com/glossary/value-at-risk)

**Taught in:** Risk Arena — Risk Budgeting & RAROC

Source: https://finicade.com/glossary/raroc