The value or potential gains that an investor forgoes by choosing a specific type of asset or strategy. In other words, it is the value of a lost chance that would have brought about some amount of profits had the investor stuck to a corresponding course of action. In investment analysis, the actual or expected cost associated with one course of action is typically measured against the most attractive alternative. For example, if a person chooses to spend $10,000 instead of lending it from one year at an 8% interest rate, his/ her opportunity loss would be $800. This amount represents the opportunity cost of current consumption.
It is also known as an opportunity cost.
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