Unsystematic Risk

B

Market risk is defined as that part of an asset's risk which cannot be eliminated through diversification. Market risk is measured by the Beta coefficient, and is commonly referred to as "systematic" or "nondiversifiable" risk. Additionally, market risk is referred to as "beta risk." Corporate risk is defined as the variability of assets expected returns without taking into consideration the effects of shareholder diversification. This is one step away from Stand-alone Risk, which measures the risk of an asset, not only without taking into consideration the effect of shareholder diversification, but of company diversification as well. Stand-alone risk assumes that the asset in question is the only asset of the firm and that the securities of the firm are the only assets in investors' portfolios. Corporate risk takes into consideration that firms will diversify their asset bases.