Financial innovation
A)may reduce the cost of risk sharing to lenders.
B)is discouraged by the government because of its adverse impact on tax revenues.
C)will generally reduce the liquidity of financial assets.
D)has occurred frequently in financial markets, but rarely in financial intermediaries.

Question

Quizplus · Accepted Answer

Financial innovation can reduce the cost of risk sharing to lenders. This is because new financial instruments and technologies can provide more efficient ways of transferring and managing risk, which reduces the cost of providing loans and other financial services.

Financial Innovation