The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as
A)risk sharing.
B)risk aversion.
C)risk neutrality.
D)risk selling.

Question

Quizplus · Accepted Answer

This process is known as risk sharing, as financial intermediaries are spreading the risk of the riskier assets across multiple low-risk assets, thereby reducing overall risk. Risk aversion refers to an individual or institution's choice to avoid risk altogether, whereas risk neutrality is a state wherein an individual or institution is indifferent to risk. The term "risk selling" is not commonly used in finance or economics.

The Process Where Financial Intermediaries Create and Sell Low-Risk Assets