The pricing of risk refers to the incremental compensation required by investors for taking on additional risk, which may be measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format. COUNT 5
QSN1 What is a measurement of pricing of risk? ANS1 interest rates or fees QSN2 What is the incremental compensation required by investors for taking on addition risk called? ANS2 pricing of risk QSN3 According to several scholars, what prevented markets from correctly pricing risk before the crisis? ANS3 lack of transparency about banks' risk exposures QSN4 How should risk levels have been disclosed according to several scholars? ANS4 straightforward, readily understandable format QSN5 What was the outcome of the financial crisis since risk levels were not adequately disclosed? ANS5 far more disruptive