TRUE OR FALSE
1) Managers hedge because they are undiversified: Small shareholders like us can diversify our risks, but managers cannot. They invest their income from labor as well as their personal assets in the firm. Therefore, while owners (principals) are diversified, managers (agents) are not. Since managers are risk averse and they control the company directly, they hedge
2) The main steps in the risk management process are identifying risks, measuring risks, creating a map, finding alternative solutions to managing the risk, and evaluating programs once they are put into place.
3) Underwriting is the process of evaluating risks, selecting which risks to accept, and identifying potential adverse selection.