Systemic Risk

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Systemic Risk

Risk common to a particular sector or country. Often refers to a risk resulting from a particular "system" that is in place, such as the regulator framework for monitoring of financial_institutions.

Systemic Risk

A risk that is carried by an entire class of assets and/or liabilities. Systemic risk may apply to a certain country or industry, or to the entire global economy. It is impossible to reduce systemic risk for the global economy (complete global shutdown is always theoretically possible), but one may mitigate other forms of systemic risk by buying different kinds of securities and/or by buying in different industries. For example, oil companies have the systemic risk that they will drill up all the oil in the world; an investor may mitigate this risk by investing in both oil companies and companies having nothing to do with oil. Systemic risk is also called systematic risk or undiversifiable risk.
References in periodicals archive ?
Default risk, systematic risk, and unexpected inflation risk may be related, as these risks are closely tied to current and future economic conditions.
Nevertheless, adding capital to the, right-hand side of regressions with all-in risk, systematic risk, or firm-specific risk as dependent variables helps us determine whether franchise value has an effect on risk taking and beyond its effect on capital.
All-in risk, systematic risk, and firm-specific risk are each regressed on franchise value, BHC size, personal income growth, and the logarithm of the capital-to-assets ratio, included to control for the effect of leverage.

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