Risk that is common to all assets of a certain type is referred to as
A) systematic risk.
B) unsystematic risk.
C) idiosyncratic risk.
D) structural risk.

Question

Quizplus · Accepted Answer

Systematic risk is the risk that affects all assets of a certain type or across the entire market, such as changes in interest rates, inflation, or geopolitical events. It cannot be diversified away and can only be managed through asset allocation and diversification. Unsystematic risk, on the other hand, is the risk that is specific to a particular company or industry, such as management changes, product recalls, or labor strikes. Idiosyncratic risk is another term for unsystematic risk. Structural risk is not a commonly used term in finance.

Risk That Is Common to All Assets of a Certain