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New trading risk indexes: application of the shapley value in finance

Author

Listed:
  • virginie terraza

    () (university of Luxembourg)

  • stephane mussard

    () (university of Montpellier I)

Abstract

The aim of this paper is to offer new risk indicators that enable one to classify securities of a portfolio according to their risk degrees. These indexes are issued from a new method of the covariance decomposition based on the Shapley Value. The risk indicators are computed via the well-known Gini coefficient, which is viewed as a new risk measure and compared with the traditional measures related with the modern theory of portfolio. These indicators yield suitable information, which could be used by private or institutional investors to trade strategies on market portfolio.

Suggested Citation

  • 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.
  • Handle: RePEc:ebl:ecbull:eb-07c10002
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    References listed on IDEAS

    as
    1. R.W.J. van den Goorbergh & P.J.G. Vlaar, 1999. "Value-at-Risk analysis of stock returns: Historical simulation, varinace techniques or tail index estimation ?," WO Research Memoranda (discontinued) 579, Netherlands Central Bank, Research Department.
    2. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    3. Franses, Ph.H.B.F. & Paap, R., 1999. "Forecasting with periodic autoregressive time series models," Econometric Institute Research Papers EI 9927-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    4. Stéphane Mussard & Virginie Terraza, 2004. "Méthodes de décomposition de la volatilité d'un portefeuille. Une nouvelle approche d'estimation des risques par l'indice de Gini," Revue d'économie politique, Dalloz, vol. 114(4), pages 557-571.
    5. Dagum, Camilo, 1997. "A New Approach to the Decomposition of the Gini Income Inequality Ratio," Empirical Economics, Springer, vol. 22(4), pages 515-531.
    6. 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.
    7. McNeil, Alexander J. & Frey, Rudiger, 2000. "Estimation of tail-related risk measures for heteroscedastic financial time series: an extreme value approach," Journal of Empirical Finance, Elsevier, vol. 7(3-4), pages 271-300, November.
    8. repec:adr:anecst:y:2011:i:101-102:p:02 is not listed on IDEAS
    9. Stephane Mussard & Virginie Terraza, 2008. "The Shapley decomposition for portfolio risk," Applied Economics Letters, Taylor & Francis Journals, vol. 15(9), pages 713-715.
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    Cited by:

    1. Haim Shalit, 2021. "The Shapley value decomposition of optimal portfolios," Annals of Finance, Springer, vol. 17(1), pages 1-25, March.

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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G0 - Financial Economics - - General

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