... problems and uncertainties faced by investors, the main one being that of asymmetric information. This exists because different people and institutions have different levels of knowledge and information about financial markets and future expectations. Financial intermediaries not only have considerable experience in investing, they are also better equipped to investigate potential investments and are more skilled in judging premiums and interest levels that correctly reflect the rate of risk. It is this lack of information on the part of the borrower that increases the risk they take. Agents with surplus funds seek to invest for reasons of protection and capital gain. Within the financial market there are three main groups of contracts that the investor can enter in to. In every case the risk must be borne by someone, it is the averter's choice to ensure his role in this is minimal. The first of these contracts is debt. The simplest ...

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