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research article
Model Uncertainty And Scenario Aggregation
2017
This paper provides a coherent method for scenario aggregation addressing model uncertainty. It is based on divergence minimization from a reference probability measure subject to scenario constraints. An example from regulatory practice motivates the definition of five fundamental criteria that serve as a basis for our method. Standard risk measures, such as value-at-risk and expected shortfall, are shown to be robust with respect to minimum divergence scenario aggregation. Various examples illustrate the tractability of our method.
Type
research article
Web of Science ID
WOS:000397560600008
Authors
Publication date
2017
Publisher
Published in
Volume
27
Issue
2
Start page
534
End page
567
Peer reviewed
REVIEWED
EPFL units
Available on Infoscience
May 1, 2017
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