Principles of finance
Undiversifiable risk is also known as known as systematic risk. This is a risk, which is common to all securities, for example the market risk. However, diversifiable risk is also known as unsystematic or idiosyncratic risk. This is the risk associated with individual assets or certain sector of economy or a specific company. A major lawsuit against one large corporation is a diversifiable risk because its effects will be felt in that corporation only and not the entire economy or market (French, 2003).
A substantial rise in oil prices is an undiversifiable risk because ...