What Is Risk-Adjusted Return On Capital (RAROC)? Risk-adjusted return on capital (RAROC) is a modified return on investment (ROI) figure that takes elements of risk into account. In financial analysis, projects and investments with greater risk levels must be evaluated differently; RAROC thus accounts for changes in an investment’s profile by discounting risky cash flows
What Is the Ratable Accrual Method? The ratable accrual method is a formula for determining how much interest income was earned on an investment over a period of time and when within the period it was earned. It counts income as it’s accrued rather than paid and is mainly used for determining taxes owed on
What Is a Rate-and-Term Refinance? A rate-and-term refinance changes the interest rate, the term—or both the rate and the term—of an existing mortgage without advancing any new money. It is also known as a “no cash-out refinance.” This differs from a cash-out refinance, in which new money is advanced on the loan and the borrower
What Is a Rate Anticipation Swap? A rate anticipation swap is a bond trading strategy in which the trader exchanges the components of their bond portfolio in anticipation of expected interest rate movements. Key Takeaways Rate anticipation swaps consist of exchanging bonds so as to maximize or minimize their sensitivity to future interest rate movements.Rate
What Is a Rate-Improvement Mortgage? A rate-improvement mortgage is a variation of a fixed-rate mortgage contract. It includes a clause permitting a borrower a one-time option to reduce their home loan interest rate when interest rates drop below the initially-contracted rate. This type of mortgage is a good option for property buyers if interest rates
What Is Rate Level Risk? Rate level risk is the possibility that an interest-bearing asset will lose value if market interest rates increase above its coupon rate. Key Takeaways Rate level risk is the risk of an interest-bearing asset losing value in the case that market interest rates rise above its coupon rate.Interest rate risk
What Is Rate on Line? Rate on line (ROL) is the ratio of premium paid to loss recoverable in a reinsurance contract. Simply put, ROL represents how much money an insurer must commit in order to obtain reinsurance coverage. A high ROL signals that the insurer must pay more for coverage, while a lower ROL
What Is the Rate of Adoption? The rate of adoption is the pace at which a new technology is acquired and used by the public. This rate can be represented by the number of members of a society who start using a new technology or innovation during a specific period of time. The rate of
What Is Rate of Change (ROC)? The rate of change (ROC) is the speed at which a variable changes over a specific period of time. ROC is often used when speaking about momentum, and it can generally be expressed as a ratio between a change in one variable relative to a corresponding change in another;
What Is a Rate of Return (RoR)? A rate of return (RoR) is the net gain or loss of an investment over a specified time period, expressed as a percentage of the investment’s initial cost. When calculating the rate of return, you are determining the percentage change from the beginning of the period until the
