This paper considers the problem of measuring the exposure to dependence risk carried by a portfolio with an arbitrary number of two-asset derivative contracts. We develop a worst-case risk measure computed over a set of dependence scenarios within a divergence restricted region. The set of...

In this paper we consider the problem of pricing and hedging European derivatives written on two underlying assets, when individual marginal distributions are known. Our aim is twofold. First, we conduct a parallel analysis between implied volatility and implied correlation for spread options in...

In this paper we address the problem of robust portfolio allocation under uncertainty with respect to the dependence between risky asset returns and for an ambiguity averse investor. We use the multiplier preferences framework with a penalty for ambiguity aversion that is proportional to the...