Opportunity loss: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
(Remove redundant duplicate instance of 'market'.)
imported>Doug Williamson
(Delete 'market'.)
Line 3: Line 3:
The worsening of a financial position when effectively 'locked in' to a course of action or to a particular fixed price or rate, compared with the alternative which could have been followed without the lock-in.
The worsening of a financial position when effectively 'locked in' to a course of action or to a particular fixed price or rate, compared with the alternative which could have been followed without the lock-in.


For example, there is always a risk of opportunity losses when we use a fixing instrument to effectively lock in a (committed) market price.
For example, there is always a risk of opportunity losses when we use a fixing instrument to effectively lock in a (committed) price.


We are effectively locked in to the predetermined and committed price, instead of being free to take advantage of actual market rates (if they turn out to be more favourable).
We are effectively locked in to the predetermined and committed price, instead of being free to take advantage of actual market rates (if they turn out to be more favourable).

Revision as of 18:25, 5 March 2017

1.

The worsening of a financial position when effectively 'locked in' to a course of action or to a particular fixed price or rate, compared with the alternative which could have been followed without the lock-in.

For example, there is always a risk of opportunity losses when we use a fixing instrument to effectively lock in a (committed) price.

We are effectively locked in to the predetermined and committed price, instead of being free to take advantage of actual market rates (if they turn out to be more favourable).


This type of loss is also sometimes known as an 'opportunity cost'.


2.

Any loss resulting from a failure to take advantage of an opportunity.


See also