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InvestHub.com's
Finance Dictionary and Glossary of Investment Terms

Moral Hazard  

Definition 1.

The chance that a contract will change the risk-taking behavior of one or both of the involved parties.
 

Definition 2.

The risk that the existence of a contract will change the behavior of one or both parties to the contract, e.g., an insured firm will take fewer fire precautions.
 

Definition 3.

The risk that the presence of a contract will affect on the behavior of one or more parties. The classic example is in the insurance industry, where coverage against a loss might increase the risk-taking behavior of the insured.
 
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