The Law Dictionary

Featuring Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed.

What is CAPITAL ALLOCATION

CAPITAL used to cover the RISKS inherent in a transaction or line of business; funds allocated act as a buffer against unexpected losses and help ensure SOLVENCY is maintained. Capital can be allocated through both internallydeveloped and regulatory mechanisms. See also ECONOMIC CAPITAL, REGULATORY CAPITAL, RESERVES, RISKADJUSTED CAPITAL, RISKADJUSTED RETURN ON CAPITAL.

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