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.
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Rank correlation methods capture nonlinear dependence, though they do so by replacing sample magnitudes with ordinal ranking.
The week on Risk.net, July 14–20, 2017Receive this by email