Flashcards
ECO205 Chapter 2
Cards in this deck (8)
- 1Adverse SelectionProblem created by asymmetric information before the transaction occurs
- 2Asset TransformationProcess of risk sharing as risky assets are turned into safer assets for investors
- 3Asymmetric InformationWhere one party does not know enough about the other party to make accurate decisions
- 4CapitalPhysical or financial wealth that is employed to produce more wealth
- 5Capital MarketMarket in which longer-term debt (generally those with original maturity of one year or greater) and equity instruments are traded
- 6Conflict of InterestPotential costs due to economies of scope. It arises when a person or institution has multiple objectives and therefore has conflicts between those objectives. It is a type of moral hazard
- 7DealersLink buyers and sellers by buying and selling securities at stated prices
- 8DefaultA situation in which the party issuing the debt instrument is unable to make interest payments or pay off the amount owed when the instrument matures