systematic vs. unsystematic risk

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heavenkid's picture

classify the following events as mostly systematic or mostly unsystematic. is the distinction clear in every case?

1, short-term interest rates increase unexpectedly - (unsystematic)

2, the interest rate a company pays on its short-term debt borrowing is increased by its bank (systematic) )

3, oil prices unexpectedly decline- (unsystematic )

4, an oil tanker ruptures, creating a large oil spill- (unsystematic )

5, a manufacturer loses a multimillion-dollar product liability suit.-(systematic )

6, a european union decision substantially broadens producer loability for injuries suffered by product users.-(systematic )

DO YOU GUYS THINK MY ANSWERS ARE CORRECT?

heavenkid

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Dreary's picture

Reverse most of them and you’ll have them right… systematic affects the whole market, unsys is specific to the company/stock/commodity, etc.

1recho's picture

Just goes to show finance guys suck at grammar :-)

If they called it “systemic risk” I’d remember the distinction better.

“Systematic” to me means “organized”, “orderly”, etc. Nothing to do with how many people it affects.

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One Rec Ho

Dreary's picture

systemic is another ball game.

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