Opportunity loss and Pricing grid: Difference between pages

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imported>Doug Williamson
(Expand 2nd definition.)
 
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).
== See also ==
* [[Credit rating]]
* [[Ratings trigger]]
* [[Rating grid]]


 
[[Category:Treasury_operations_infrastructure]]
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.
 
This type of opportunity loss can result from analysis paralysis, other factors, or both.
 
 
== See also ==
* [[Analysis paralysis]]
* [[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