Systematic risk is another name for which type of risk?

Systematic risk is another name for which type of risk?

• A. Market risk
• B. Operational risk
• C. Reputational risk
• D. Liquidity risk

Answer: (A)

Systematic risk is risk that affects the entire market due to broad economic factors like GDP growth, inflation, interest rates, or political events. Because these factors move most assets together, this risk cannot be eliminated simply by diversifying a portfolio; it’s the non-diversifiable portion of risk. That’s why it’s called market risk. In contrast, the other risks stem from specific, non-market sources: operational risk comes from internal processes and systems, reputational risk from public perception, and liquidity risk from difficulties in buying or selling assets quickly.

Systematic risk is risk that affects the entire market due to broad economic factors like GDP growth, inflation, interest rates, or political events. Because these factors move most assets together, this risk cannot be eliminated simply by diversifying a portfolio; it’s the non-diversifiable portion of risk. That’s why it’s called market risk. In contrast, the other risks stem from specific, non-market sources: operational risk comes from internal processes and systems, reputational risk from public perception, and liquidity risk from difficulties in buying or selling assets quickly.