Opportunity loss and RFR: Difference between pages

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1.  ''Hedging - regret risk.''
Risk-Free Rate.


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 abbreviation 'RFR' usually refers to risk-free benchmark interest rates, such as SONIA.


For example, there is always a risk of opportunity losses when using a fixing instrument to effectively lock in a (committed) price.
Also known as ''near'' risk-free rates, recognising that such rates are never entirely risk-free.


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).


Theoretically risk free rates of ''investment'' return, for example in the Capital asset pricing model, are more often designated by 'Rf' or 'rf'.


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


==See also==
*[[Capital asset pricing model]]
*[[O/N]]
*[[RFR WG]]
*[[Risk-free rate of return]]
*[[Risk-free rates]]
*[[SONIA]]


2.  ''Operational and other contexts.''
[[Category:Corporate_financial_management]]
 
[[Category:Financial_products_and_markets]]
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]]
* [[Reckless prudence]]
* [[Regret risk]]
 
[[Category:Self_management_and_accountability]]
[[Category:Financial_risk_management]]

Revision as of 12:29, 24 March 2019

Risk-Free Rate.

The abbreviation 'RFR' usually refers to risk-free benchmark interest rates, such as SONIA.

Also known as near risk-free rates, recognising that such rates are never entirely risk-free.


Theoretically risk free rates of investment return, for example in the Capital asset pricing model, are more often designated by 'Rf' or 'rf'.


See also

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