Opportunity loss and Pricing grid: Difference between pages

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imported>Doug Williamson
(Delete 'market'.)
 
imported>Doug Williamson
(Align with qualifications material CFF 4.2.2 page 8 Section 6.2.)
 
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1.
A clause in a loan document which links the pricing of the borrowing to the credit rating of the borrower.


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.
Also known as a 'ratchet'.


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 ==
* [[Credit rating]]
* [[Ratings trigger]]
* [[Rating grid]]


== See also ==
[[Category:Treasury_operations_infrastructure]]
* [[Fixing instrument]]
* [[Opportunity cost]]
* [[Opportunity risk]]
* [[Regret risk]]

Revision as of 16:34, 25 July 2015

A clause in a loan document which links the pricing of the borrowing to the credit rating of the borrower.

Also known as a 'ratchet'.


See also