Attribution
Overview
Example 2
{% f(x_{1}, x_{2}) = x_1 \times x_2^2 %}
Consider two points
{% (x_{1}, x_{2}) = (1,1) %}
{% (x_{1}, x_{2}) = (2,2) %}
Then the value of f changes from 1 to 8. How much of the change was due to the change in x1 versus x2?
A common example of non linear attribution is to ask how much a particular asset contributes to the overall
risk of a portfolio. Because there correlations between assets that are less than 1, there is a diversification
effect. In such a case, it may be meaningless to ask how much a particular asset contributes to the risk
(except in the marginal case)
