  We argue that using the Shapley value of cooperative game theory as the
scheme for risk allocation among non-orthogonal risk factors is a natural way
of interpreting the contribution made by each of such factors to overall
portfolio risk. We discuss a Shapley value scheme for allocating risk to
non-orthogonal greeks in a portfolio of derivatives. Such a situation arises,
for example, when using a stochastic volatility model to capture option
volatility smile. We also show that Shapley value allows for a natural method
of interpreting components of enterprise risk measures such as VaR and ES. For
all applications discussed, we derive explicit formulas and / or numerical
algorithms to calculate the allocations.
