Systematic Risk

In finance and economics, systematic risk (sometimes called aggregate risk, market risk, or undiversifiable risk) is vulnerability to events which affect aggregate outcomes such as broad market returns, total economy-wide resource holdings, or aggregate income. In many contexts, events like earthquakes and major weather catastrophes pose aggregate risks—they affect not only the distribution but also the total amount of resources. If every possible outcome of a stochastic economic process is characterized by the same aggregate result (but potentially different distributional outcomes), then the process has no aggregate risk.

In finance, this concept is typically referred to as "systematic risk", but in economics it is typically referred to as "aggregate risk". The two labels describe the same concept.

Systematic risk should not be confused with systemic risk, the risk of loss from some catastrophic event with potential to collapse an entire financial system.