In the portfolio management, there are two commonly used models for the risk measurement. The first one is a well know model proposed by Markowitz. Unfortunately,  it is characterized by defects. Firstly, it is a method for determining the effective portfolios constructed from a population consisting of a large number of advantages. Secondly, the proposed risk measure is not monotonic, mainly therefore it cannot be considered to be appropriate to the measurement. The second one is thesingle-index model, which however implies that the residual components of the individual shares are not correlated with each other. This only contributes to approximate the equity of portfolio risk, since the assumption of these nutrients cannot be fulfilled in practice. In the talk we analyze some properties of a new measure, known as the Foster-Hart measure of riskiness, in the context of portfolio management of financial instruments. The measure has been introduced by D.P Foster and S. Hart (2009).

References

Foster D. P.,  Hart S., An Operational Measure of Riskiness, Journal of Political Economy, 117 (2009), 785-814.

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