What are some examples of systematic risks?
Think in the broadest terms possible - or system-wide rather than particular parts of a system or particular organisations. In a financial context it would be a failure across the whole sector leading to a potential total collapse.Think government policy changes - cold war, acquisition of nuclear capability, international economic forces - depressions, or even acts of nature of sufficient size to affect global markets.Systematic risks by their nature can be unpredictable and difficult to avoid. Financial systems are particularly vulnerable as their importance right across markets and organisational structures tends to amplify any nascent risk with potentially dangerous consequences
Sources of unsystematic risk include?
The answer is (c). The risk that is specific to an industry or firm. 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.
Sources of unsystematic risk include?
A Systematic risk includes the entire market, since all stocks seem to go up and down at the same time, as a whole. Thus, you can deduct the "market fluctuations", since this is Systematic.
Reasons for saving and investing include?
1. Need for funds to meet emergencies 2. Retirement income 3. Desire to leave an estate for children a. 1 and2 b. 1 and3 c. 2 and3 d. all of these choices 30. Many investments have common characteristics including 1. Existence of secondary markets 2. Risk 3. Potential for capital gains a. I and2 b. I and3 c. 2 and3 d. all of these choices 3 l. Diversification reduces a. systematic risk b. unsystematic risk c. market risk d. purchasing power risk 32. Sources of risk include l. fluctuating exchange rates 2. a firm's financing decisions 3. higher interest rates 4. loss of purchasing power a. l and 2 b. 2and3 c. 2and4 d. all four 33. Which of the following is not part ofthe underwriting process? a. the prospectus b. the originating house c. the SIPC d. the SEC 34. FDIC insures a. treasury bills b. money market mutual funds c. savings accounts d. repurchase agreements 35. The spread is the a. difference between the bid and ask prices b. commission charged by the broker c. difference between the purchase and sale prices d. difference between the commissions charged by full service and discount brokers 36. Daily securities transactions that are reported in the financial press often include l. the volume of transactions 2. the high and low prices for the day 3. the net change in price from the previous day
A diverse portfolio includes investments in 50 securities. The portfolios systematic risk is likely to be.....?
systematic risk is likely to be high. You can't get rid of systematic risk by diversifying. systematic risk affects the entire market and therefore it affects every stock. "Interest rates, recession and wars all represent sources of systematic risk because they affect the entire market and cannot be avoided through diversification. Whereas this type of risk affects a broad range of securities, unsystematic risk affects a very specific group of securities or an individual security. Systematic risk can be mitigated only by being hedged. Even a portfolio of well-diversified assets cannot escape all risk. " -investopedia
What is marketing risk management?
Market risk encompasses the risk of financial loss resulting from movements in market prices. Market risk is rated based upon, but not limited to, an assessment of the following evaluation factors:The sensitivity of the financial institution's earnings or the economic value of its capital to adverse changes in interest rates, foreign exchanges rates, commodity prices, or equity prices.The ability of management to identify, measure, monitor, and control exposure to market risk given the institution's size, complexity, and risk profile.The nature and complexity of interest rate risk exposure arising from nontrading positions.Where appropriate, the nature and complexity of market risk exposure arising from trading and foreign operations.This topic also provides specific guidance on interest-rate risk, which is the exposure of a bank's current and future earnings and capital arising from adverse movements in interest rates, and the market risk capital rule, which establishes regulatory capital requirements for bank holding companies and state member banks with significant exposure to certain market risks.