economy is subject to aggregate risk. Agents cannot fully insure and guarantee the same consumption in either state. It can be shown that, in this case, the price ratio will be less than the ratio of probabilities of the two states: , so . Thus, for example, if the two states occur with equal probabilities, then . This is the well-known finance result that the contingent claim that delivers more resources in the state of low market returns has a higher price. In heterogeneous agent models While the inclusion of aggregate risk is common in macroeconomic models, considerable challenges arise when researchers attempt to incorporate aggregate uncertainty into models with heterogeneous agents. In this case, the entire distribution of allocational outcomes is a state variable which must be carried across periods. This gives rise to the well-known curse of dimensionality. One approach to the dilemma is to let agents ignore attributes of the aggregate distribution, justifying this assumption by referring to bounded rationality. Den Haan (2010) evaluates several algorithms which have been applied to solving the Krusell and Smith (1998) model, showing that solution accuracy can depend heavily on solution method. Researchers should carefully consider the results of accuracy tests while choosing solution methods and pay particular attention to grid selection. In projects Systematic risk exists in projects and is called the overall project risk bred by the combined effect of uncertainty in external environmental factors such as PESTLE, VUCA, etc. It is also called contingent or unplanned risk or simply uncertainty because it is of unknown likelihood and unknown impact. In contrast, systemic risk is known as the individual project risk, caused by internal factors or attributes of the project system or culture. This is also known as inherent, planned, event or condition risk caused by known unknowns such as variability or ambiguity of impact but 100% probability of occurrence. Both systemic and systematic risks are residual risk. See also Modern portfolio theory Capital asset pricing model Risk modeling Taleb distribution References Financial markets Financial risk Economic systems