Company-specific risk: also known as distributable risk or unsystematic risk, refers to the possibility of causing economic losses to a single company due to unique events that occur in a single company.
Difference:
Market risk cannot be eliminated by portfolio; Company-specific risks can be eliminated through portfolio.
Market risk can require risk return; Company-specific risks cannot require risk return.
Market risk brings economic losses to all companies; Company-specific risks only bring economic losses to a single company.
Market risk is also one of the most common risks in the financial system, which refers to the risk that the market value of the trading portfolio will change negatively during the period required for liquidation. The return of market portfolio is the sum of the gains and losses generated by various transactions. Any decline in value will lead to market losses in the corresponding period.
It is not suitable to use the holding time of financial instruments as an index to measure market risk, because banks can realize them at any time during this period, or use hedging to avoid possible losses caused by future price changes. In fact, its risk refers to the fluctuation of market value in the shortest time required for clearing market transactions. This is why market risk only exists in the liquidation period.
Although the liquidation period is short, the currency value will fluctuate greatly under the condition of unstable market. If it happens that these market instruments are illiquid, then they need to make substantial concessions before they can be sold. The longer the liquidation period, the greater the possibility of significant changes in market value. Generally speaking, the length of the liquidation period varies with the type of bill. Generally speaking, foreign exchange transactions have a short term (one day), while some derivatives have poor liquidity and generally have a long liquidation period. In either case, the regulatory authorities will formulate rules and set the length of the liquidation period.