The risk that the failure of a few large financial institutions can affect the entire financial system is called:
A) systemic risk.
B) moral hazard.
C) credit risk.
D) solvency risk.

Question

Quizplus · Accepted Answer

Systemic risk refers to the risk that the failure of one or a few large financial institutions can cause a ripple effect throughout the entire financial system, potentially causing widespread economic damage. This can happen due to the interconnectivity of financial institutions, where the failure of one institution can lead to a chain reaction of defaults and contagion in which other institutions and markets become affected.

The Risk That the Failure of a Few Large Financial