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Risk is the exposure to the chance of an unfavorable event. There are two types...

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Finance

Risk is the exposure to the chance of an unfavorable event. There are two types of risk, unsystematic risk, and systematic risk. Systematic risk cannot be eliminated by diversification since systematic risk affects almost all assets to some degree. Unsystematic risk can be eliminated through diversification and the reward of taking risk is the risk premium. Total risk which is the sum of unsystematic risk and systematic risk is measured by standard deviation whiles systematic risk is measured by beta. The capital asset pricing model defines the relative risk of an individual asset as its contribution to the risk of a well-diversified portfolio. Students will have the opportunity to calculate and discuss how changes in the general stock and

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