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The Shapley decomposition for portfolio risk

Author

Listed:
  • Stéphane Mussard

    (GREDI, Université de Sherbrooke and GEREM, Université de Perpignan)

  • Virginie Terraza

    (CREA, University of Luxembourg, Faculty of Law Economics and Finance)

Abstract

The aim of this paper is to provide an application of the Shapley Value to decompose financial portfolio risk. Decomposing the sample covariance risk measure yields relative measures, which enable securities of a portfolio to be classified according to risk scales.

Suggested Citation

  • Stéphane Mussard & Virginie Terraza, 2006. "The Shapley decomposition for portfolio risk," Cahiers de recherche 06-09, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    • Handle: RePEc:shr:wpaper:06-09
    as

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    File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0609.pdf
    File Function: First version, 2006
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    References listed on IDEAS

    as
    1. F. Chantreuil & A. Trannoy, 1999. "Inequality decomposition values : the trade-off between marginality and consistency," THEMA Working Papers 99-24, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    2. Mercedes Sastre & Alain Trannoy, 2002. "Shapley inequality decomposition by factor components: Some methodological issues," Journal of Economics, Springer, vol. 9(1), pages 51-89, December.
    3. C. Seidl & Patrick Moyes & A. F. Shorrocks, 2002. "Inequalities: Theory, experiments and applications," Post-Print hal-00157353, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. James V. Hansen, 2021. "Coalition Feature Interpretation and Attribution in Algorithmic Trading Models," Computational Economics, Springer;Society for Computational Economics, vol. 58(3), pages 849-866, October.
    2. Benjamin R. Auer & Tobias Hiller, 2021. "Cost gap, Shapley, or nucleolus allocation: Which is the best game‐theoretic remedy for the low‐risk anomaly?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 876-884, June.
    3. Haim Shalit, 2021. "The Shapley value decomposition of optimal portfolios," Annals of Finance, Springer, vol. 17(1), pages 1-25, March.
    4. Tobias Hiller, 2022. "Allocation of portfolio risk and outside options," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2845-2848, October.
    5. Algaba, Encarnación & Béal, Sylvain & Fragnelli, Vito & Llorca, Natividad & Sánchez-Soriano, Joaquin, 2019. "Relationship between labeled network games and other cooperative games arising from attributes situations," Economics Letters, Elsevier, vol. 185(C).
    6. Francesco Devicienti, 2010. "Shapley-value decompositions of changes in wage distributions: a note," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(1), pages 35-45, March.
    7. repec:ebl:ecbull:v:3:y:2007:i:25:p:1-7 is not listed on IDEAS
    8. Patrick S. Hagan & Andrew Lesniewski & Georgios E. Skoufis & Diana E. Woodward, 2021. "Portfolio risk allocation through Shapley value," Papers 2103.05453, arXiv.org.
    9. virginie terraza & stephane mussard, 2007. "New trading risk indexes: application of the shapley value in finance," Economics Bulletin, AccessEcon, vol. 3(25), pages 1-7.

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    More about this item

    Keywords

    Decomposition; Risk; Shapley; Volatility;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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