Copyright

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.

Answer and Explanation:

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

See full answer below.

Become a Study.com member to unlock this answer! Create your account

View this answer

Learn more about this topic:

Loading...
Financial Tools, Strategies & Systems Used in Market Planning

from GACE Marketing Education (546): Practice & Study Guide

Chapter 3 / Lesson 14
1.5K

Related to this Question

Explore our homework questions and answers library