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Mutualization of Risk

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Mutualization of Risk
The spread of risk among several parties. For example, if five investors each put in $200,000, and the total amount of the investment equals $1 million, risk is mutualized because no one investor can possibly lose the whole million.


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Second, in part because of the mutualization of risk resulting from the loss-sharing, the arrangement operates as a system with some of the same kinds of interdependencies that arise in a multilateral netting arrangement.
 
 
 
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