Mutualization Of Risk
- Dividing up the costs associated with risks and financial losses among several investors, businesses, organizations or people. Mutualizing risk lowers the overall potential for significant financial loss to any one entity.
Historically, one of the key roles that financial clearing houses at futures exchanges play is to promote stability and minimize (or more effectively manage and respond to) financial crises by mutualizing risk among members.
Mortgage-backed securities and credit default swaps are used to mutualize risk among investors. By dividing up risk, these derivatives effectively reduce each member's hedging cost, as each party diversifies its risk exposure.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Business and Industry Review — ▪ 1999 Introduction Overview Annual Average Rates of Growth of Manufacturing Output, 1980 97, Table Pattern of Output, 1994 97, Table Index Numbers of Production, Employment, and Productivity in Manufacturing Industries, Table (For Annual… … Universalium
MetLife — MetLife, Inc. Type Public Traded as NYSE: MET Industry … Wikipedia
Affect theory — In psychology, affect is an emotion or subjectively experienced feeling. Affect theory is a branch of psychoanalysis that attempts to organize affects into discrete categories and connect each one with its typical response. So, for example, the… … Wikipedia