Security in physical and application layers have been always thought of as a complementary paradigm. In this paper, we argue that potential cooperation between physical and application layers provides several advantages and unique features that are not available in each paradigm by itself. The problem of exchanging confidential messages between nodes, A and B, in the presence
of an active adversary, E, over an insecure MIMO channel is considered. We introduce a double layer spatial signature modulation (SSM) in which the transmitted information is conveyed into the spatial signature of the transmitting antenna array observed by the intended receiver. Meanwhile, any other eavesdropper does not share the same bearing angle of the legitimate receiver obtains infinitesimally small amount of information. Further, to establish a secure link, A and B are required to share a secret common information prior to communication while keeping E ignorant about it. To that end, we introduce a novel physical layer assisted secret key agreement (SKA) protocol that leverages the cooperation between physical and application layer security. Angle of Arrival (AoA) and Angle of Departure (AoD) are physical layer parameters that can be exploited not only for their well performance at low SNR, but also for their contextual meaning that provides security advantages. In the proposed SKA protocol, AoA is explored as a physical mean for message source authentication, meanwhile, AoD is used as a common source of randomness in a smart signal processing approach to generate secret key bits without any extra communication overhead. We show that E can be kept ignorant about the generated key bit stream conditioned on its physical location. This work introduces the notion of physical hardness to an adversary pursuing either active or passive strategy. After establishing a secret common information, we show that the continuous use of AoA as a mean for message source authenticity provides a considerable advantage against active adversary during the message exchange phase. Extending the proposed scheme to a mobile communication environment is also provided. Finally, quantitative analysis for the security gain due to the potential cooperation between physical and application layer security is developed..