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Compare and contrast systematic and unsystematic risk and how it affects a portfolio.
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- Define the term risk?What is the difference between systematic risk and unsystematic risk? Give an example of each.Briefly define and give examples of each of the following components of total risk. Which type of risk matters, and why? Diversifiable (or firm-specific) risk Undiversifiable (or systematic) risk
- Explain the difference between (a) stand-alone risk and (b) risk in a portfolio context. How are they measured or calculated, and are they relevant to investors?Risk can be subdivided into systematic and unsystematic risk. Describe each type of risk, the related compensation for bearing that risk, and give some examples of each type.What are quantitative measurements versus non-quantitative measurements with respect to risk?