Daring to quantify the markets |

08/03/2023

We usually compute return attribution to know how much each asset contributes to portfolio return. This calculation is quite easy because return formula is linear and sub-additive. In that context, one can split the whole portfolio return in smaller parts corresponding to each asset. However, although risk measures have to be coherent (monotonous, sub-additive, homogeneous and translational invariant), their formulas are a more complex representation than a linear function. Then, how can we compute risk contribution?