Allocation of portfolio risk and outside options

In this note, we outline the application of coalition structure games to the distribution of portfolio risk across individual assets in a portfolio. In the existing literature, there is no risk measure that takes into account both - the contributions of individual assets to portfolio risk and the contributions to the risk of the stock market as a whole. We show the application by means of a simulation study as an example. In this context, it can be shown that the approach contributes to the solution of the so-called low-risk puzzle.