According to Merriam-Webster, opportunity cost is the added cost of using resources (as for production or speculative investment) that is the difference between the actual value resulting from such use and that of an alternative (as another use of the same resources or an investment of equal risk but greater return).
Opportunity Cost = greater rate of return – your rate of return
(investments of equal risk over some period of time)
“…reference point thinking leads people to give opportunity costs less weight than out-of-pocket costs of the same magnitude (Shefrin, 2002).”
Opportunity risk is generally defined as the probability of loss if resources are committed to an investment and a more lucrative opportunity presents itself.
Is opportunity risk a measurement of regret exposure?
