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| ''Risk management.'' | | ''Bank regulation''. |
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| Diversification is the process of spreading risk, to limit the possibility that an adverse event affecting a small number of investments could have an unacceptably detrimental effect on the overall portfolio.
| | The part of the regulatory framework which is designed to enhance the safety and soundness of individual financial institutions, rather than the financial system as a whole. |
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| Often summarised as 'Don't put all your eggs in the same basket'.
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| In corporate finance, the term is often used to mean the process of ensuring that an investment portfolio is constructed such that all possible specific risk (diversifiable risk) is eliminated.
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| Diversification is a form of risk reduction.
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| However, some residual risks cannot be eliminated by diversification.
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| == See also == | | == See also == |
| * [[Asset allocation]] | | * [[Capital adequacy]] |
| * [[Cash in the new post-crisis world]] | | * [[Macroprudential]] |
| * [[Correlation]]
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| * [[Credit risk diversification]]
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| * [[Diversifiable risk]]
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| * [[Diversity]]
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| * [[Market risk]]
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| * [[Matching]]
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| * [[Portfolio]]
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| * [[Specific risk]]
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| * [[Undiversifiable risk]]
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| [[Category:Risk_frameworks]]
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Revision as of 05:55, 27 March 2016
Bank regulation.
The part of the regulatory framework which is designed to enhance the safety and soundness of individual financial institutions, rather than the financial system as a whole.
See also
