________ and ________ allow a financial intermediary to offer safe liquid liabilities such as deposits while investing the depositors' money in riskier illiquid assets.
A)Diversification; high equity returns
B)Price risk; collateral
C)Free riders; regulations
D)Monitoring; diversification
E)Primary markets; foreign exchange markets

Question

Quizplus · Accepted Answer

Monitoring and diversification are key strategies that allow financial intermediaries to manage risk in their investments while still offering safe, liquid liabilities to depositors. With effective monitoring, intermediaries can identify and manage risks before they become issues, while diversification helps to spread risk across multiple investments, reducing the impact of any single asset's performance on the overall portfolio. Together, these strategies make it possible for intermediaries to invest in riskier, illiquid assets while still providing a stable source of funds for depositors.

________ and ________ Allow a Financial Intermediary to Offer Safe

and Allow a Financial Intermediary to Offer Safe