Unlocking Financial Success: Optimal Capital Allocation Strategies Revealed!
The article discusses how financial institutions make decisions on where to invest their money based on project risks. It suggests using a compensation system called Economic Value Added (EVA) to help make the best investment choices. The study shows that using a concept called Risk-Adjusted Return on Capital (RAROC) can help measure performance accurately. It also explains how to handle different levels of risk within a company and how to deal with limited information when making investment decisions.