Coherent Risk Measures

Coherent risk measures are mathematical tools used in finance to assess the potential risk of an investment or portfolio. They follow clear logical principles—such as consistency, subadditivity (diversification helps reduce risk), positive homogeneity (doubling the investment doubles the risk), and translation invariance (adding a safe amount doesn't increase risk). These properties ensure the risk measure accurately reflects true risk and allows investors to compare different investments reliably. In essence, coherent risk measures help professionals quantify and manage risk in a consistent, rational manner.