Concentration risk (cluster risk) in asset investments refers to the accumulation of certain assets in a portfolio. Assets that are correlated and have similar risk factors. Thus, if one of these assets falls in value, all the others are affected.
The term cluster risk is not only used in asset investments but also in general economics.
In banking, the term cluster risk is used when a bank has accumulated too high outstanding loan volumes in a particular customer segment. Customer segments can be persons, foreign currencies, rating classes, economic sectors or regions.
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