specific risk

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Specific risk

Nonsystematic Risk

Risk that is unique to a certain asset or company. An example of nonsystematic risk is the possibility of poor earnings or a strike amongst a company's employees. One may mitigate nonsystematic risk by buying different of securities in the same industry and/or by buying in different industries. For example, a particular oil company has the diversifiable risk that it may drill little or no oil in a given year. An investor may mitigate this risk by investing in several different oil companies as well as in companies having nothing to do with oil. Nonsystematic risk is also called diversifiable risk. See also: Undiversifiable risk.

specific risk


diversifiable risk

that part of total risk (within the CAPITAL-ASSET-PRICING MODEL) uniquely attributable to the holding of a specific financial security. Unlike MARKET RISK, specific risk is independent of general market variations. Events unique to a particular security may comprise such corporate decisions as dividend policy, changes in capital structure, recruitment of top personnel and so forth. Changes in a firm's share price may be positive or negative depending upon the opinion of investors. The argument is that such specific variations occur randomly and therefore if a sufficiently large and well-diversified PORTFOLIO of shares is held, such variations will cancel each other out. This means that investors can eliminate specific risk by diversifying their portfolio.
References in periodicals archive ?
The amount available for a specific risk can vary significantly, depending on the risk's location, an insurer's accumulated exposure and the concentration of exposures in a given area.
The program aims to identify specific risk factors for this outcome and target them by providing nutritional and mental health services, and services promoting healthy lifestyles (including smoking cessation).
Norton spoke of the need for building specific risk assessment as well as the need for reauthorization of the Terrorism Risk Insurance Act to guarantee the availability of risk coverage for real estate assets.
Customers can tailor the system with specific risk profiles for each part of their business to ensure the business impact analysis is uniquely relevant to their individual needs.
Most colon cancer (75%) occurs in individuals without specific risk factors for the disease, suggesting that lifestyle is the overwhelming culprit.
According to the court, the detainee's statements to jail officers that he was having unspecified problems and needed to be moved from his cellblock, and the detainee's mother's telephone call to an unknown jail employee advising that the detainee had been threatened with sexual assault, were not sufficient to give the sheriff actual notice of a specific risk of serious harm.
2, "Inherent Risk and Control Assessments: Evidence on the Effect of Pervasive and Specific Risk Factors.
Prior to the revision, an institution that measured specific risk with an internal model that adequately measured such risk was subject to a minimum capital charge.
The purposes of this article are (1) to clarify the concept of risk shifting; (2) to establish the concept of the proportionate contribution of the parent's specific risk to the parent's total risk as a relevant measure for tax deductibility of premiums paid to the captive; (3) to develop a theory to resolve the different opinions among the Tax Court, the IRS, and the companies involved in the tax deductibility issue; and (4) to develop a method to determine the degree of tax deductibility of premiums paid to captives.
Following this phase, Steelpoint creates workflow for specific risk areas in an effort to avoid future litigation risks and to ensure compliance with SEC regulations.