Tag: international banking

International Banking – Asymmetric Information, Adverse Selection, Moral Hazard

Q: Discuss how insurance companies manage the problems of adverse selection and moral hazard. A: Every insurance company deals with the asymmetric information as they rely on accurate and timely information. As adverse selection and moral hazard are day-to-day problems in the nature of the insurance industry. For an effective risk assessment, they try to minimize the adverse selection and...

International Banking – Asymmetric Information, Adverse Selection, Moral Hazard – 2

Q. Explain briefly Asymmetric Information, Adverse Selection, and Moral Hazard. A. Asymmetric information occurs when there is a gap between the amount of information that people have. In a market, it exists when a seller has more information than a buyer. In case of asymmetric information, information is distributed unbalanced. Information necessary to make an informed decision is not known...

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