Risk management for return enhancement

Lundin and Satchell present a non-linear asymmetric dependence method between two assets


Myriad dependence measures are actively implemented in financial market applications today. Pearson's productmoment correlation coefficient (as well as covariance) remains ubiquitous in practice, despite its inability to capture nonlinear dependence and its assumption of homoscedasticity. CLICK HERE TO VIEW THE PDF Rank correlation methods capture nonlinear dependence, though they do so by replacing sample magnitudes with ordinal ranking.