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Financial Risk Manager Part 1

Financial Risk Manager Part 1

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One of the risk management building blocks is the need to balance risk and reward. Specifically, GARP says, "Economic capital provides the firm with a conceptually satisfying way to balance risk and reward. For each activity, firms can compare the revenue and profit they are making from an activity to the amount of economic capital required to support that activity." Each of the following statements is true about RAROC EXCEPT which is inaccurate?

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