Which types of risk are typically included in systematic risk?

Systematic risk refers to the risks that affect the entire market or a significant portion of it, rather than risks that are specific to a particular company or industry. These risks are often interconnected with external factors that influence the overall economic environment. Among the types of risks included in systematic risk are market risk, interest rate risk, and exchange rate risk.

Market risk is the risk of losses due to changes in the prices of securities, which can arise from shifts in investor sentiment or economic conditions. Interest rate risk refers to the potential for changes in interest rates to adversely affect investments, especially those tied to fixed income securities. Exchange rate risk involves the fluctuations in the value of currencies, which can impact international investments and global trade.

These elements collectively demonstrate how systematic risk can lead to potential losses across a broad range of investments, not limited to a specific asset. The other types of risks mentioned in the other options, such as credit risk, operational risk, liquidity risk, political risk, and legal risk, typically fall under unsystematic risk or are specific to companies. They do not have a broad market-wide impact in the same way that market, interest rate, and exchange rate risks do. Thus, the inclusion of market risk, interest rate risk, and exchange