We investigate the influence of the dependence between random losses on the shortfall and on the diversification benefit that arises from merging these losses.We prove that increasing the dependence between losses, expressed in terms of correlation order, has an increasing effect on the...

Portfolio diversification and hedging have become more complicated in large part due to adverse developments in the time-varying behavior of correlations, and consequently there is renewed appreciation for understanding how correlation dynamics affect the diversification and hedging properties...