A paper profit is an unrealized capital gain on an asset. The amount of this profit is the difference between the asset's cost and the current market price. An actual profit is only realized after the asset has been sold to an unrelated third party. A paper profit situation most commonly arises when an investor is holding a security and has not yet sold it. The investor does not realize a profit on the security until it has been sold. This can cause a problem when the investor mis-times the sale or is restricted in his ability to sell the security until a later date, possibly resulting in a decline in the market value of the security and therefore the loss of the paper profit.
A paper profit is also known as an unrealized profit.