vv
Discuss the differences between
firm-specific risk and market-risk using at least two real-world examples.
Firm specific risk will mean that all such diversifiable risk can be eliminated by proper allocation of capital to different securities. These are the risk which are unsystematic in nature and they will be related to a particular firm or particular industry.
Market risk wale meen all such systematic risk which can never be diversified and these risks are inherent risk that will be existent due to operating in the market because they will be risk of operating into the market and these are mostly macro risk.
Firm specific risk can be diversified away but market risk can never be diversified away.
Examples of firm specific risk will be change in demand pattern in a particular industry or legal penalty over one company.
Example of market risk will be change in the market interest rate or Risk of political uncertainty.
Get Answers For Free
Most questions answered within 1 hours.