be able to pool risks by holding a diversified portfolio. Insurance works less well when the insurance policy attracts only the worst risks (adverse selection) or when the insured firm is tempted to skip on maintenance and safety procedures (moral hazard). Insurance is generally purchased from specialist insurance companies‚ but sometimes firms issue specialized securities instead. The idea behind hedging is straightforward. You find two closely related assets. You then buy one and sell the other
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assumptions | Partial goal conflict among participants‚ Efficiency as the effectiveness criterion‚ Information asymmetry between principal and agent | Information Assumption | Information as a purchasable commodity | Contracting problem | Agency (moral hazard and adverse selection)‚Risk sharing | Problem domain | Relationships in which the principal and agent have partly differing goals and risk preferences (e.g. compensation‚ regulation‚ leadership‚ impression management‚ whistle blowing‚ vertical integration
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Assessment activity 1 1. Compare and contrast two appropriate techniques that could be used to investigate incidents. You do not have to limit your response to techniques discussed in the text. Which techniques would you favor? Why? Interviews and Inspections can be to investigate incidents. I favor inspections‚ as this is raw data from the incident scene which can be used to draw up scenarios and conclusions. 2. When using questioning techniques to investigate
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Are cell Phones a Health Hazard? With the increasing of mobile phones’ functions‚ people rely more and more on them. The lower price also enables the mobile phone to become people’s daily necessity. Now even many students have their own mobile phone. People began to worry about the cell phone which will do harm to our health. But why people become worried about that? There are some speculates that cell phone might potentially threaten human being’s health. Mobile phones can emit radiofrequency
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Preventing Chemical Accidents Introduction to Process Hazard Analysis First Edition Process Safety Management Training from the NJ Work Environment Council EMBED PBrush This material was produced under grant SH-17813-08-60-F-34 from the Occupational Safety and Health Administration‚ U.S. Department of Labor. It does not necessarily reflect the views or policies of the U.S. Department of Labor‚ nor does mention of trade names‚ commercial products‚ or organizations imply endorsement by the U
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efficiently. b) Two problems that impede insurance companies from working perfectly and their ability to spread risk are adverse selection and moral hazard. Adverse selection is when a high-risk person is more likely to apply for insurance than a low-risk person because a high-risk person would benefit more from insurance protection. Moral Hazard is how after people buy insurance‚ they have less incentive to be careful about their
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transaction fee from selling securities‚ it may have been more profitable for them to hide the risks from investors and increase sales • The bank’s failure to advise clients about the nature and risks of these investments is a result of the moral hazard problem; this raises questions about the transparency of these transactions and conflict of interest between the bank as both a profit-seeker and dealer of ABCP • This lack of transparency eventually played a large part in causing a credit crisis
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It has long been recognized that a problem of moral hazard may arise when individuals engage in risk sharing under conditions such that their privately taken actions affect the probability distribution of the outcome In economic theory‚moral hazard is a situation in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk.. Economist Paul Krugman described moral hazard as: "...any situation in which one person makes the decision about
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kinds of moral hazard problems might you worry about with your employees? ANS- Being an employer if I had any employee working hard but no incentives/bonus given I would worry that would make them less interested in working & make them feel irresponsible. For eg. a sales worker without any bonus/remuneration would not make any extra effort to sell the product. Q.11) If there were no asymmetry in the information that a borrower and a lender had‚ could there still be a moral hazard problem? ANS-
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appointees • Ensure all workers have site inductions and any further information and training needed for the work • Consult with the workers • Liaise with CDM co-ordinator regarding ongoing design • Secure the site DESIGNERS • Eliminate hazards and reduce risks during design • Provide information about remaining risks • Check client is aware of duties and CDM
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