The risk that a borrower has more information about their previous behavior that a potential lender is known as the ________.

Question

Quizplus · Accepted Answer

The adverse selection problem refers to the risk that a borrower may have more information about their previous behavior that a potential lender, which can lead to higher default risk and lower quality borrowers being selected for loans. Moral hazard problem refers to the risk that the borrower may engage in riskier behavior after receiving the loan, while time-space discontinuity and tertiary behavior problem are not relevant to this concept.

The Risk That a Borrower Has More Information About Their