Why asymmetric information problem arise in financial market ?
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Asymmetric information is a problem in financial markets such as borrowing and lending. In these markets, the borrower has much better information about his financial state than the lender. The lender has difficulty knowing whether it is likely the borrower will default.
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Asymmetric information is a problem in financial markets such as borrowing and lending. In these markets, the borrower has much better information about his financial state than the lender. ... However, this only gives limited information. The consequence is that lenders will charge higher rates to compensate for the risk.
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