Profit Planning, Risk Aggregation and Economic Capital

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Profit Planning, Risk Aggregation and Economic Capital - Article

This article explains how banks connect profit planning with risk aggregation, capital allocation and economic capital. It covers risk-adjusted profitability, expected and unexpected loss, diversification and concentration effects, ICAAP, regulatory versus economic capital, business-line capital allocation and practical management decisions, providing the conceptual foundation for understanding RAROC in CAIIB BFM.

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