Adverse+Selection+&+Moral+Hazard

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AdverseSelection&MoralHazard——byGroup2 XiaoHaili(Shirley)——LeaderLingMinglong(Jay)ShiJiwei(Whiskey)HeShengjuan(Joyce)RuanYao(Ciel)Members DivisionHeandlin——analyzingthecontentsinthetable.Shirley,shi,andLin——searchingfortheinformationontheinternet.Ruan——translatingandmakingPPT. Okay~Let’sstartourpresentationnow… FirstlyHewillshowyouheranalysisofboxesinpage30andpage34inthebook.Youcanturntopage30and34. FinancialNewsmoneymarketrate“MoneyRate"columnIllustrateshowtheinterestratesonmanyoftheinstrumentsarereportedPage30 InterestratesPrimerateoncorporatebankloansFederalfundsrateonovernightloansinthefederalfundsmarketTreasurybillrateonUStreasurybillCommercialpaperashort-termdebtinstrumentissuedbylargebanksandwell-knowncorporationsCertificateofdepositdebtinstrumentsoldbyabanktodepositorswithannualinterests MoneymarketMoneymarketinstrumentsShorttermstomaturitytheleastpricefluctuationstheleastriskyinvestmentsInterestratesgoodindicatorse.g.Primerate:anindictorofbussinessborrowingfrombanks.Treasurybillrate:anindictorofgeneralinterest-ratemovement FinancialNews——Foreignstockmarketindexes“WorldMarket”columnalistingofinternationalstockmarketindexesPage34 stockmarketindexisamethodofmeasuringthevalueofasectionofthestockmarket.ItiscomputedfromthepricesofselectedstocksItisatoolusedbyinvestorsandfinancialmanagerstodescribethemarket,andtocomparethereturnonspecificinvestments. InternationalstockmarketNowadays,theincreasedinterestinforeignstockshaspromptedthedevelopmentofmutualfundsthatspecializeintradinginforeignstockmarkets.Theinternationalizationoffinancialmarketshasprofoundinfluenceononecountry’economy.Investorsnowneedtopayattentiontothestockindexesfortheirowncountry,aswellas,thoseforforeignstockmarket SecondlyShiwilltellyousomethingaboutAdverseSelection. DefinitionAdverseselection,ornegativeselectionisatermusedineconomics,insurance,statistics,andriskmanagement.Itreferstoamarketprocessinwhich“bad”resultsoccurwhenbuyersandsellershaveasymmetricinformation，the"bad"productsorservicesaremorelikelytobeselected. 1.CarInsuranceadverseselectionWiththegradualincreaseinthenumberofindividualstobuyafamilycar,thecarinsurancebusinessinrecentyears,isgrowingquickly.,Themainreasonoftheautoinsurancebusinesslossestopremiumschargedrelativelylow,theresultscausedincomenotarrivedexpenditures. Tosolvethisproblem,theonlywhyistoincreasetheamountofthepremium;otherwiseitwouldhavebeenlossesdown.Thefinalresolutionistoimproveinsurance,carinsurancepremiumincomebegantodecline,theadverseselectiontold,willingtobuyinsuranceisoftenthemostrisk,preventchargehigherinsurancepriceswillhavealowerriskpeopletobuyinsurance. Highpremiumsofinsurancecompanies,escapefromdangerandlow,youfurtherincreasethepriceofinsurance,simplydonotbuyinsurance.Therootcauseofthisadverseselectioneffectisthattheinsurancecompanytomastertheinformationisincomplete. .2.AdverseselectionofcorporatehumanresourcesDirectmanifestationsofadverseselectioninrealitythelossoflargequantitiesofthecorporatehigh-qualitypersonnel,theemergenceofadverseselectionisoftenincompleteorpartial,incompleteperformance,theenterpriseslostalotoftalentontheonehand,andatthesametimeareconstantlytotheintroductionofhigh-qualitytalent. 3.Adverseselectioninnetworktransactions(1)networkproductqualityisnoteasyprobation(2)networkvendorsworththataredifficulttorecognize(3)thenetworkproductqualityevaluationsubjectivity ThirdlyRuanwillgiveanexampleofMoralHazardtoyou. DefinitionMoralhazardistheproblemcreatedbyasymmetricinformationafterthetransactionoccurs.Moralhazardinfinancialmarketsistherisk(hazard)thattheborrowermightengageinactivitiesthatareundesirable(immoral)fromthelender’spointofview,becausetheymakeitlesslikelythatwillbepaidback.Becausemoralhazardlowerstheprobabilitythattheloanwillberepaid,lendersmaydecidethattheywouldrathernotmakealoan. ExampleXinjiangZhonghewasthefavoredchildoftheinvestmentoffundindustryunderthebackgroundofmarket’snon-ferrousmetalheatin2006.MorganvotedonthemultiplefundsheldbytheXinjiangZhonghe,includingthevoteonMorgandoubleinterestbalancehybridfunds,stockfunds,AlfaChinaOpportunitiesFund,andthevanguardofGrowthFundofstrengtheningtheideologicalandmoraleducationestablishedonSeptember20,2006. TangJianwasanassistantofAlfa'sFundManagerbeforeheservedasamanagerinthevanguardofGrowthFound.Thestocks’priceofXinjiangZhonghewasaround17YuanpershareattheendofSeptember,2006.Untilthen,thepricecontinuedtosoar,uptoaround28Yuanpershare. TangJianusedhisfather’saccounttogetherwiththethirdaccounttopurchasestocksofXinjiangZhonghebeforefundpositionsandgrossedmorethan$1500000sinceheservedasthemanagerofthevoteontheMorganfund. Atthebeginningof2007,theDepartmentofthefundofChinaSecuritiesRegulatoryCommissionannounced,whichincludedrequiringfundcompaniestoreporttheirownstaffandtheirimmediaterelatives’IDnumbersandsecurityaccountanddeclaredifthereisexistinginbehaviorofconcealingornotreportingorhidingtheidentityofspeculation,theywillbetreatedinstrictsanctions. LastlyThankyouforlisteningtoourgroup’spresentation~