Answer to Question #300447 in Finance for Musah86

Question

Explain the role of asymmetric information in financial markets.

Answer 1

Asymmetrical information is used to inform either the buyers or the sellers about the product that is supposed to be traded in the market thereby equipping the parties with the necessary knowledge about the product. Since the buyer has more information about the product than the buyer, there is a tendency for the seller to exploit the buyer to take advantage of the seller.