What type of risk does systematic risk refer to?

Systematic risk refers to the risk that is inherent to the entire market or economy, which cannot be eliminated through diversification. It encompasses factors that affect the overall performance of financial markets and is influenced by a variety of economic factors, including inflation, interest rates, political events, and natural disasters that have broad implications.

This type of risk affects all investments in the market and is often associated with macroeconomic events. Since it impacts the market as a whole, individual investments or portfolios cannot escape its effects, making it different from risks that are unique to a specific company or sector. This is why the correct answer identifies systematic risk as being derived from market-wide economic factors.

The other options refer to specific categories of risk that are not applicable to systematic risk; for instance, risks that are unique to a single company are considered unsystematic risk and can be mitigated through diversification. Similarly, regulatory risks and natural disasters, although impactful, do not encompass the full breadth of systematic risk, which is fundamentally tied to market-wide fluctuations.