Systemic versus Systematic Risk
From Open Risk Manual
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Systemic versus Systematic Risk
In the context of Portfolio Management a common conceptual framework postulates that Portfolio Diversification (Hence Risk Diversification) eliminates Idiosyncratic Risk leaving the Portfolio exposed only to Systematic Risk factors (affecting all portfolio components)
Systemic Risk denotes any Risk Type that is (or may become) pervasive across the entire system being considered. The two concepts have partial overlap: Some systemic risks may express as systematic risk in a portfolio.
