The Study On Improvement And Application Of Loan Pricing With RAROC Method

TO meeting challenges brought by Chinese interest market-oriented reform and requirements of Basel? capital,Chinese commercial banks must change the traditional loan pricing method under the condition of more competitive market environment,more sever interior and exterior risk management and capital supervision. So how to properly make the loan price has become a theoretically and practically significant problem.First, the paper introduces RAROC model and make a comprehensive analysis on its advantages and disadvantages.In general,the RAROC model neglects the relationship between banks and their customers.In this paper,we make a adjustment on loan rates by a rational combine of the customer profitability analysis model and RAROC model,according to customers return,to improve RAROC model.Then we quantify the parameters of the improved RAROC model.At last,a conclusion is given,on the basis of comparative analysis of a simulated case.By applying with the improved RAROC Pricing Model,Chinese commercial banks can enhance the pricing power and intensify cooperation relationship between banks and customers.