Asked by: Zarko
asked in category: General Last Updated: 23rd February, 2020

What is unique risk?

Definition of Unique Risk. Also called unsystematic risk or idiosyncratic risk. Specific company risk that can be eliminated through diversification. See: Diversifiable risk and unsystematic risk.

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Hereof, what is unsystematic risk examples?

Examples of unsystematic risk include losses caused by labor problems, nationalization of assets, or weather conditions. This type of risk can be reduced by assembling a portfolio with significant diversification so that a single event affects only a limited number of the assets. Also called diversifiable risk.

Furthermore, what is firm specific risk? How to Calculate Fair Value. Learn More → Firm-specific risk is the unsystematic risk associated with a firm and is fully diversifiable according to the theory of finance. An investor can decrease his exposure to firm-specific risk by increasing the number of investments held in his portfolio of stocks.

Similarly, it is asked, what are the different types of risk?

Within these two types, there are certain specific types of risk, which every investor must know.

  • Credit Risk (also known as Default Risk)
  • Country Risk.
  • Political Risk.
  • Reinvestment Risk.
  • Interest Rate Risk.
  • Foreign Exchange Risk.
  • Inflationary Risk.
  • Market Risk.

What is idiosyncratic risk?

The idiosyncratic risk can be defined as the risk which affects a very diminutive number of assets, and can be almost eradicated through diversification. It is quite similar to unsystematic risk. As explained by Investopedia, idiosyncratic risk is particular to a small number of stocks.

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