Adverse selection in financial markets occurs when:

a. The potential lender (those who are most likely in a desirable outcome) are unlikely to seek out borrowers with high risk in order to avoid losses altogether

b. The potential lenders (those who are the most likely to be interested in a favourable positive outcome) are the ones who most actively seek out to lend and therefore will have too much risk on their balance sheets

c. The potential borrowers (those who are the most likely to produce an undesirable, adverse outcome) are the ones who most actively seek out a loan and are thus most likely to be selected d. The potential borrowers (those who are the most likely to produce a desirable positive outcome) are the ones who are unlikely to seek out a loan and therefore the ones most unlikely to be selected