Endogenous risk is a type of Financial risk that is created by the interaction of market participants. It was proposed by Jon Danielsson and Hyun-Song Shin in 2002. Risk can be classified into the two categories of exogenous and endogenous risk. Under exogenous risk, shocks to the financial system arrived from outside the system, like an asteroid might hit the earth. Market participants react to the shock but do not influence it. By contrast, with endogenous risk, the interaction of market participants, each with their own abilities, biases, prejudices and resources, results in most market outcomes and all large outcomes. In particular, systemic risk is a form of endogenous risk.