The two things which do not allow for a complete market for the allocation of risk...

The two things which do not allow for a complete market for the allocation of risk to exist are ___________________ and ____________________.

This is all that was given, it is fill in the blank.

Expert Solution

systamatic risk and unsystamatic risk

A market portfolio, by nature of being completely diversified, is subject only to systematic risk, or risk that affects the market as a whole, and not to unsystematic risk, which is the risk inherent to a particular asset class.

Systematic risk refers to the risk inherent to the entire market or market segment. Systematic risk, also known as “undiversifiable risk,” “volatility” or “market risk,” affects the overall market, not just a particular stock or industry. This type of risk is both unpredictable and impossible to completely avoid. It cannot be mitigated through diversification, only through hedging or by using the correct asset allocation strategy

Unsystematic risk is unique to a specific company or industry. Also known as “nonsystematic risk,” "specific risk," "diversifiable risk" or "residual risk," in the context of an investment portfolio, unsystematic risk can be reduced through diversification.

jeff jeffy answered 1 year ago

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