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The dependence structure between the returns of financial assets plays an important role in risk...

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Finance

The dependence structure between the returns of financial assets plays an important role in risk measurement. For liquid markets, which of the following statements is incorrect? a. With short time horizons (3 months or less), correlation estimates are very stable. b. Even if the return distributions of two assets have a correlation of zero, the returns of these assets are not necessarily independent. c. Correlation is a valid measure of dependence between random variables for only certain types of return distributions. d. Copulas make it possible to model marginal distributions and the dependence structure separately.

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