Which term best describes a risk that influences a broad set of assets across markets?

• A. Interdependence
• B. Cross-national approach
• C. Systematic Risk
• D. Geocentrism

Answer: (C)

Systematic risk, also known as market risk, is the risk that moves with the overall market and affects a wide range of assets across different markets. It arises from factors that influence the entire economy or broad segments of it—things like central bank policy, inflation, economic growth, political events, or global crises. Because these macro factors impact many securities at once, this type of risk cannot be eliminated simply by picking different investments; even a diversified portfolio still experiences swings driven by the market as a whole. Assets with higher sensitivity to the market (often measured by beta) tend to move more in sync with overall market movements, illustrating how broad exposure drives this risk.

Interdependence focuses more on how assets move together due to shared exposures, but it doesn’t inherently describe the broad, market-wide influence on many assets. A cross-national approach is about examining markets across countries rather than describing a single risk that spans markets. Geocentrism is unrelated to financial risk terms.