alleryStart learning →Lenders spreading loans across many kinds of borrower reduce which credit risk?
ACurrency swing risk
BConcentration risk
CStatistical model risk
DMargin call risk
Answer & Solution
Correct answer: B. Concentration risk
A small borrower pool brings high unsystematic credit risk, called concentration risk, which diversifying the pool lowers.
Keep practising Risk Management
Browse all Risk Management questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
What does an option give its buyer?Which contract is standardized in terms of asset, quantity, price and date?An investor holds a stock and buys an option to sell it at a set price. What is the cost oWhat is hedging?What went wrong with diversification in the late-2000s recession?Diversification benefits increase when the correlation between assets is what?Who initiated modern portfolio theory in 1952 with the thesis "Portfolio Selection"?In modern portfolio theory, how is the risk of a portfolio defined?