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Adverse Selection
A situation in which asymmetric information leads to the market being dominated by inferior products or by participants who are at a disadvantage.
Moral Hazard
A situation where one party in a transaction has the opportunity to take risks because the costs that those risks entail will not be borne by that party.
Portfolio Risk
The variability of returns from a portfolio of investments.
Utility Function
A mathematical representation that ranks preferences or satisfaction levels individuals derive from consuming goods and services.
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