Define moral hazard. Explain how it applies to the banking industry and why this problem arises when

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Define moral hazard. Explain how it applies to the banking industry and why this problem arises when deposit insurance premiums are fixed. Why does this problem lead to risk-sensitive capital requirements? Give an analogy to automobile insurance.

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Value at Risk The New Benchmark for Managing Financial Risk

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Authors: Philippe Jorion

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Question Posted: May 03, 2016 02:11 AM

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Define moral hazard. Explain how it applies to the banking industry and why this problem arises when

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Moral hazard arises when people do not bear the cost of their actio...View the full answer

Value at Risk The New Benchmark for Managing Financial Risk

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