Opportunity loss and Counterparty risk: Difference between pages

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1. ''Derivatives contracts.''


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.
When a contract is in the money, the risk that the other party to the contract fails for any reason, for example bankruptcy.


For example, there is always a risk of opportunity losses when using 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).
2.


More generally, the risk to each party to a contract that the counterparty will not meet its contractual obligations, whether they are unable, or simply unwilling, to do so.


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


== See also ==
*[[Cash in the new post-crisis world]]
*[[CCR]]
*[[CRD IV]]
*[[Credit risk]]
*[[Guide to risk management]]
*[[In the money]]
*[[Putting a limit on losses]]
*[[Risk]]


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.
==Other resource==
 
*[http://www.treasurers.org/node/8928 Treasury essentials: Counterparty risk, The Treasurer, April 2013]
 
== See also ==
* [[Analysis paralysis]]
* [[Fixing instrument]]
* [[Opportunity cost]]
* [[Opportunity risk]]
* [[Regret risk]]


[[Category:Self_management_and_accountability]]
[[Category:Manage_risks]]
[[Category:Financial_risk_management]]

Latest revision as of 10:24, 18 January 2024

1. Derivatives contracts.

When a contract is in the money, the risk that the other party to the contract fails for any reason, for example bankruptcy.


2.

More generally, the risk to each party to a contract that the counterparty will not meet its contractual obligations, whether they are unable, or simply unwilling, to do so.


See also


Other resource

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