Stable allocations of risk

Peter Csoka, P. Jean-Jacques Herings*, Laszlo A. Koczy

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review


The measurement and the allocation of risk are fundamental problems of portfolio management. Coherent measures of risk provide an axiomatic approach to the former problem. In an environment given by a coherent measure of risk and the various portfolios' realization vectors, risk allocation games aim at solving the second problem: How to distribute the diversification benefits of the various portfolios? Understanding these cooperative games helps us to find stable, efficient, and fair allocations of risk. We show that the class of risk allocation and totally balanced games coincide, hence a stable allocation of risk is always possible. When the aggregate portfolio is riskless, the class of risk allocation games coincides with the class of exact games. As in exact games any subcoalition may be subject to marginalization even in core allocations, our result further emphasizes the responsibility involved in allocating risk. (C) 2008 Elsevier Inc. All rights reserved.

Original languageEnglish
Pages (from-to)266-276
Number of pages11
JournalGames and Economic Behavior
Issue number1
Publication statusPublished - Sept 2009
Event8th Annual Conference on Electronic Commerce (EC 2007) - San Diego, Canada
Duration: 11 Jun 200715 Jun 2007


  • Coherent measures of risk
  • Risk allocation games
  • Totally balanced games
  • Exact games


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