Systematic risk


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Systematic risk

Also called undiversifiable risk or market risk. A good example of a systematic risk is market risk. The degree to which the stock moves with the overall market is called the systematic risk and denoted as beta.

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.

systematic risk

Risk caused by factors that affect the prices of virtually all securities, although in different proportions. Examples include changes in interest rates and consumer prices. Although it is not possible to eliminate systematic risk through diversification, it is possible to reduce it by acquiring securities (for example, those of utilities and many blue chips) that have histories of relatively slowly changing prices. Also called market risk, nondiversifiable risk. Compare unsystematic risk. See also beta.

Systematic risk.

Systematic risk, also called market risk, is risk that's characteristic of an entire market, a specific asset class, or a portfolio invested in that asset class.

It's the opposite of the risk posed by individual securities in a class or portfolio, also known as nonsystematic risk. The predictable impact that rising interest rates have on the prices of previously issued bonds is one example of systematic risk.

References in periodicals archive ?
The potential for an additional increase in leverage in a low interest rate environment will also increase systematic risk.
It is expected that the new rules will ensure the protection of policyholders interests and a reduction in the overall systematic risk in the insurance sector.
They theoretically proved that there is a positive relationship between systematic risk and profit growth, and also by reviewing the information of 651 companies during 1982-1987, they found some experimental evidences on the relationship of systematic risk with the growth rate of net profit and operational profit.
Systematic risk represents the effect of unexpected changes in macroeconomic and financial market conditions on the performance of borrowers.
The inclusion of SLIC into the CISSII will greatly enrich the CISSII database and help in achieving the objectives of this information sharing mechanism, including the reduction of systematic risk in the insurance sector.
Thanks to systematic risk hedging and to the effective mechanisms applied, the bank is not exposed to such foreign exchange risks," it said, adding that Hellenic does not participate in, nor is it exposed to any companies involved in online foreign exchange trading.
Spatt is also a current member of the Systematic Risk Council (SRC), a private sector, non-partisan body of former government officials and financial and legal experts committed to addressing regulatory and structural issues relating to systemic risk in the United States, as well as a member of the Shadow Financial Regulatory Committee, which critiques and evaluates governmental financial regulatory policies.
Systematic risk is monitored closely by the regulators after the crisis and regulatory reforms have been pursued in relation to this.
CMGE's share price was at one point 100% higher than the last call in August; though it experienced a pullback due to systematic risk, the current share price is still 18% higher than the initial coverage on August 5, 2014.
2-2 there is a direct and significant relation between the systematic risk of the companies and the cost of their debts.
The article shows the magnitudes of systematic risk exposure and parameter uncertainty.
Hedge funds by their very purpose generally both long and short the market -- in some cases even market neutral -- and most seek mitigated or even positive exposure to systematic risk.

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