If knowledge possessed by one party in a financial transaction is not known to the other party, ________ exists.

Question

Quizplus · Accepted Answer

Asymmetric information refers to a situation where there is a lack of equal knowledge or information between the parties involved in a transaction, which can lead to an imbalance of power and potential for exploitation. This can occur in various financial transactions, including investments or loans, and may result in adverse selection or moral hazard problems. Disintermediation is the process of removing intermediaries or middlemen from financial transactions, while fraud refers to intentional deception or misrepresentation. No financial intermediation simply means that there is no involvement of intermediaries in the transaction.

If Knowledge Possessed by One Party in a Financial Transaction