The following quote about the financial system is taken from Alessandri and Haldane (2009):...

Question:

The following quote about the financial system is taken from Alessandri and Haldane (2009): 'Although diversification may purge idiosyncratic risk, it simultaneously reduces diversity and thereby increases systematic risk'.

Explain the quote and how it relates to the vulnerability of the financial system to crises.

Financial System

It is a system which channelizes the savings into an investment with the help of different players like the bank, non-banking financial institutions, stock exchanges, etc. In other words, the financial system helps in increasing investment in the economy.

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The statement 'Although diversification may purge idiosyncratic risk, it simultaneously reduces diversity and thereby increases systematic risk' means...

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Financial Tools, Strategies & Systems Used in Market Planning

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Chapter 3 / Lesson 14
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The decision to spread your company's operations to a new market is a big one, and one that shouldn't be taken likely. This lesson shows some of the tools involved in market planning.


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