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      Question

      The Herfindahl-Hirschman Index (HHI) is predominantly

      used by financial regulators and analysts to evaluate which of the following specific market conditions or types of risks within an industry?
      A Interest Rate Risk Correct Answer Incorrect Answer
      B Operational Risk Correct Answer Incorrect Answer
      C Liquidity Risk Correct Answer Incorrect Answer
      D Market Concentration Risk Correct Answer Incorrect Answer
      E Credit Default Risk Correct Answer Incorrect Answer

      Solution

      HHI measures market concentration by squaring and summing the market shares of firms. A high HHI reflects less competition and possible monopolistic risks.

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