i-manager Publications

Risk Assessment using Shapley Value and Comparing Results with Optimum Portfolio Weights

Aastha Gupta*

S & P Global Market Intelligence, Gurgaon, Haryana, India.

Periodicity:December - February'2020
DOI : https://doi.org/10.26634/jmgt.14.3.16639

Abstract

Every investor wants to know the risk of the assets they hold in a portfolio. Variance is commonly used for measuring risk and there are other tools as well. Yet, the modern analytical tools provide partial risk measure only. This paper includes a method for evaluating risk of an asset in a portfolio using cooperative game theory. In this approach, a portfolio of securities is viewed as a cooperative game played by securities, for which the risk they individually contribute to the portfolio can be determined. This value is known as the Shapley Value. It is calculated by computing the marginal utility of a player to the portfolio risk by looking at all the possible combination of coalitions in which the player would participate. The Shapley values of the assets so obtained are then compared with the weights of those assets in Global Minimum Variance Portfolio (GMPV). The historical data for assets have been taken for three sectoral indices of Indian Stock Exchange.

Keywords

Shapley Value, Portfolio Risk, Cooperative Games, Global Minimum Variance Portfolio (GMPV), Risk Assessment, Indian Stock Exchange.

How to Cite this Article?

Gupta, A. (2020). Risk Assessment using Shapley Value and Comparing Results with Optimum Portfolio Weights. i-manager's Journal on Management, 14(3), 20-24. https://doi.org/10.26634/jmgt.14.3.16639

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