The Risks Arising from Financial Instruments Are Typically

question 79

Multiple Choice

The risks arising from financial instruments are typically:

• A) credit risk, fair value risk and market risk.
• B) credit risk, liquidity risk and financial risk.
• C) inherent risk, liquidity risk and market risk.
• D) credit risk, liquidity risk and market risk.

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Definitions:

Incentive Problem

A situation where the economic incentives offered do not align with desirable outcomes, leading to inefficiency or undesired behavior.

Communist Central Planning

An economic system where the government makes all decisions regarding the production and distribution of goods and services.

Shortages

Situations where the demand for a product or service exceeds the available supply, often leading to waiting lists or increased prices.

Incentive Problem

Refers to situations in which the incentive structures, or rewards and punishments, do not encourage the desired behavior among individuals or entities, leading to efficiency or performance issues.