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.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

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References in periodicals archive

When in the market the equilibrium exists, the expected stock returns are proportional to systematic risk, which is inevitable even diversifying the portfolio.

Smoothing techniques for market fluctuation signals/I lyginimo metodu taikymas rinkos svyravimams prognozuoti

Morgan Stanley and Oliver Wyman in a joint report, said the financial crisis propelled regulators to find ways to boost market transparency, cut systematic risk and trading cost through use of centralised clearing, trading automation and new trade reporting regimes.

Capital markets infrastructure set to change

Second, extending the list of usual determinants, we include two financial variables leverage and systematic risk. Likewise, to date we have not found any studies that took these factors into account.

Acquisitions, joint ventures or arm's-length alliances? Analyzing the determinants of the choice of growth strategy in Brazil from 1996 through 2007

There is the risk that mortality improvements would induce systematic risk that diversifying through securitization could not overcome.

Securitization of permanent life insurance policies

One of the distinct features of MF under these draft rules is the identification of the counter-party, which will enable financiers to assess the credit worthiness of financees thereby minimising any possible systematic risk and interruptions to the smooth functioning of capital markets.

SECP seeks comments on Draft Securities Rules

"We need to ensure that we pay people in accordance with the growing complexities of the global market and in alignment with the growing parameters of systematic risk."

Central banks hailed for tackling financial crisis