Bank Loan Pricing: Funding Cost, Expected Loss, Capital & RAROC
Build a loan rate from funding, operating cost, expected loss, capital and margin, model expected loss year by year, size economic capital, calculate RAROC, solve for the minimum rate, price the whole relationship, fill a rating × tenor grid and run a credit committee, every cell checked.
The first lesson is free — no account needed.
About this course
A bank loan pricing and RAROC course for credit analysts, relationship managers, bank finance teams and finance students, built on fictional corporate borrowers in a spreadsheet. You build a loan rate from funding cost, operating cost, expected loss, the cost of capital and a margin, model expected loss year by year as PD × LGD × EAD on an amortising loan, turn unexpected loss into economic capital and price it at the hurdle rate, calculate RAROC and economic profit at the client's rate, solve for the minimum rate that just meets the hurdle, lower it with the value of deposits and fees in relationship pricing, fill a rating × tenor pricing grid with one mixed-reference formula and run six requests through a credit committee. The models are simplified for teaching, not a bank's internal method, and not financial advice. The first lab is free.
Lessons
- Loan Pricing Build-Up: Funding, Costs, Expected Loss, Capital & MarginFree
- Expected Loss per Year: PD × LGD × EAD on an Amortising Loan Pro
- Unexpected Loss, Economic Capital & the Cost of Capital Pro
- RAROC: Risk-Adjusted Return on Capital vs the Hurdle Rate Pro
- Solving for the Minimum Loan Rate that Hits the Hurdle Pro
- Relationship Pricing: Deposits and Fees that Lower the Loan Rate Pro
- Pricing Grid by Rating and Tenor: A Two-Way Table Pro
- Portfolio RAROC and Loan Approval Decisions Pro