Final answer:
Risk can be divided into systemic and operational risk, or market and credit risk. Systemic risk affects the entire financial system, while operational risk is inherent within a company. Market risk is related to financial market changes, and credit risk is the chance of a counterparty's financial default.
Step-by-step explanation:
Risk can be classified into two categories: systemic risk and operational risk, or market risk and credit risk. Systemic risk refers to the potential for a system-wide event to affect the value of all financial assets, such as a global financial crisis. Operational risk addresses the internal risks within a business or organization that can lead to failures in day-to-day operations. Market risk involves the potential for investors to lose money due to fluctuations in financial markets, while credit risk is the chance that a borrower will default on their financial obligations.
Market risk includes factors such as changes in interest rates, stock prices, and exchange rates. Credit risk, on the other hand, is specific to the possibility of a counterparty not fulfilling their part of financial contracts, primarily in lending and bond issuance. Therefore, the correct answer to the question would be both (a) Market risk, credit risk and (b) Systemic risk, operational risk, meaning option (d) 'a and b only' is correct.