Podcast
Play an AI-generated podcast conversation about this lesson
Questions and Answers
Which concept can reduce the effect of moral hazard and adverse selection?
Which concept can reduce the effect of moral hazard and adverse selection?
- Use of current accounts
- Optimizing credit portfolios
- Incentive compatible contracts (correct)
- Shocks on the assets side
What do banks specialize in optimizing?
What do banks specialize in optimizing?
- Credit portfolios (correct)
- Current accounts on the liability side
- Moral hazard and adverse selection
- Credit and equity portfolios
What is the risk of Musharakah - Mudarabah (M-M) financing?
What is the risk of Musharakah - Mudarabah (M-M) financing?
- Systemic instability (correct)
- Shocks on the assets side
- Incentive compatible contracts
- Optimizing credit portfolios
Why can't shocks on the assets side be absorbed by current accounts on the liability side?
Why can't shocks on the assets side be absorbed by current accounts on the liability side?
Signup and view all the answers
What is the main concern about the greater use of M-M on the asset side?
What is the main concern about the greater use of M-M on the asset side?
Signup and view all the answers
What do Islamic banks primarily use on the liability side?
What do Islamic banks primarily use on the liability side?
Signup and view all the answers
What is the argument against the use of incentive compatible contracts?
What is the argument against the use of incentive compatible contracts?
Signup and view all the answers
What can reduce the effect of moral hazard and adverse selection?
What can reduce the effect of moral hazard and adverse selection?
Signup and view all the answers
What is the main concern about the shocks on the assets side?
What is the main concern about the shocks on the assets side?
Signup and view all the answers
What is the potential consequence of greater use of M-M on the asset side?
What is the potential consequence of greater use of M-M on the asset side?
Signup and view all the answers
