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Question: A business that engages in substantial trading of commodities, currencies, and financial instruments must trust its traders to act with some prudence and with knowledge that the company's overall financial performance may depend on their activities. Lloyds of London recently announced that it would write "rogue trader" insurance policies that make good the losses of a trader's employer if, for example, she violates established limits and rules on trading. Enumerate some elements of moral hazard and adverse selection that might pose obstacles to Lloyds successfully marketing such a policy.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M93111717

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