If the value of the financial sector is in terms of reducing the individual risk
ID: 2779887 • Letter: I
Question
If the value of the financial sector is in terms of reducing the individual risk in the economy, how could you measure the value of the financial sector without using information on loan payments (broadly construed to include any interest payment necessary to measure an interest rate)? If we think of the amount of individual risk remaining after individuals buy portfolios is a measure of the ineffectiveness of the financial sector [or its imperfections], what do you think accounts for these imperfections?
Explanation / Answer
The value of financial sector reducing the individual risk in economy, we could measure by taking the systematic risk of a particular sector.Spotting the emerging risk would fit to monitor the state of an economy and the wealth of finanical sector in order to implement the policy in monetary terms.
The accounts for the imperfections that we think of the amount of individual risk that remains after buying individual portfolios that would measure the ineffectiveness of that particular financial sector would be forecasting that should be pre-determined in advance so that we can find any deviation if so that it can be corrected by them easily.