A type of risk that arises from factors other than broad market movements/ volatility. This risk includes different risk factors such as event risk, default risk, and idiosyncratic variations. This risk constitutes the probability of loss caused by an adverse price movement of an asset/ investment/ security due principally to factors related to a certain entity (e.g., in the case of a security, specific market risk relates to the issuer). This is opposed to the risk of loss arising from adverse changes in aggregate market prices (i.e., the general market risk).

For a position, specific market risk is the risk of loss from changes in the market value of a position that arises from factors other than broad market movements, including event risk that corresponds to changes in market price caused by unexpected events specific to a particular obligor or position.

Both general and specific market risks are components of the broader “market risk“. Entities, particularly regulated ones such as banks, are required to compute their capital requirement for specific risk based on specific models or approaches.