Adverse Selection and Moral Hazard Are Problems That Arise in the Presence

question 108

True/False

Adverse selection and moral hazard are problems that arise in the presence of asymmetric information.

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Definitions:

Futures Contract

A legal agreement to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.

Forward Contract

A financial derivative contract between two parties to buy or sell an asset at a predetermined future date for a price that is agreed upon today.

Contingent Liability

A potential financial obligation that depends on a future event arising from past transactions or events.

Probable

In financial and legal contexts, a high likelihood that an event will occur, often used in reference to the realization of assets or the incurrence of liabilities.