Idiosyncratic risk

1.

In the Capital Asset Pricing Model, the same as Diversifiable risk.

Also known as Specific risk or Unsystematic risk.

2.

The concept is also important in bank regulation and stress testing. Regulated banks must be resilient both to shocks which are market-wide, and to shocks which are idiosyncratic or specific to the regulated entity.

See also

• Diversifiable risk
• Stress test