Financial Economics - Moral Hazard

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Moral hazard happens when an agent is given an implicit guarantee of support in the event of making a loss – for example insurance pay-outs or the prospect of a state bail-out

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Thanks for the explanation. Much easier than google's definition.

MrElias
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One economic viewpoint I’ve seen in textbooks and lectures is that moral hazard comes under a type of asymmetric information.

However, where is the asymmetry if both (e.g) bank and government know huge losses will be funded by nationalisation?

AlokJadva
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Question: so moral hazard played a role in the 2008 crisis Bc the federal reserve got involved in attempt to try and save the economy?

isabellahernandez