# Risk, idiosyncratic (idiosyncratic risk)

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- Post ID: 587222
- Modified: 2023-07-25T21:14:10+00:00
- Language: en

## Definition

Dangers arising from circumstances in a single company. This risk can be reduced by diversifying investments (the risk that is firm specific and can be diversified through holding a portfolio of shares). - In the context of securitized securities, the risk refers to the originator's claim against a single borrower - for example, from a mortgage. By placing a class of similar claims in a pool - in the example, all mortgage loans of the originator - this form of risk should be greatly reduced due to the large number of relatively small loan amounts as a rule. - Of course, systematic risk and systemic risk remain. Falling residential property prices and an associated loss of confidence in collateralized debt obligations have shown in the subprime crisis that even well-mixed portfolios can suffer a very sharp decline in value. - Cf. ECB Monthly Bulletin, February 2008, p. 93 (minimizing idiosyncratic risk does not exclude market risk). Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec. Professor Dr. Eckehard Krah, Dipl.rer.pol. E-mail address: info@ekrah.com https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk https://www.jung-stilling-gesellschaft.de/merk/ https://www.gerhardmerk.de/

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