The Process by Which Risks Are Shared Among Many Different

question 120

Multiple Choice

The process by which risks are shared among many different assets or people is called:

• A) the credit risk.
• B) the risk spread.
• C) diversification.
• D) the liquidity process.

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Definitions:

Gratuitous Agent

An agent who acts on behalf of another person (the principal) without expecting or receiving any form of compensation.

Consideration

Something of value exchanged between parties in a contract, making the agreement legally binding.

Agency Relationship

A legal relationship in which one party, the agent, acts on behalf of another, the principal, in dealings with third parties.

Tort Liability

Legal responsibility for damages caused by a civil wrong or injury other than breach of contract.