The risk that the failure of one financial institution can lead to the failure of other financial institutions is called:
A) systemic risk.
B) moral hazard.
C) liquidity risk.
D) solvency risk.

Question

Quizplus · Accepted Answer

Systemic risk refers to the risk of widespread financial collapse due to the failure of one financial institution, which can spread throughout the financial system and impact the stability of other financial institutions. This happened in the 2008 financial crisis, when the failure of Lehman Brothers led to a domino effect of other financial institutions failing, causing widespread economic turmoil.

The Risk That the Failure of One Financial Institution Can