Which term describes a risk that occurs due to war or political instability?

The correct term to describe a risk that arises due to war or political instability is fundamental risk. This type of risk is systemic in nature and affects the entire market or economy, rather than just a specific company or industry. Fundamental risks include significant events like wars, natural disasters, and changes in government policies that can lead to widespread economic implications.

This concept contrasts with specific risks, which are risks unique to a particular company or industry, such as operational issues or product recalls. Major risk is not a formally defined category within risk management; rather, it might refer to any risk that has significant consequences, but it lacks the specific context like fundamental risk does. Market risk, on the other hand, refers to the potential for losses due to market-wide factors such as changes in stock prices or interest rates, which can be influenced by fundamental risks, but are not limited to them. Understanding fundamental risk helps investors and analysts assess potential vulnerabilities in their portfolios that arise from macroeconomic events beyond individual companies' control.