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research article

Model Uncertainty And Scenario Aggregation

Cambou, Mathieu  
•
Filipovic, Damir  
2017
Mathematical Finance

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.

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Type
research article
DOI
10.1111/mafi.12097
Web of Science ID

WOS:000397560600008

Author(s)
Cambou, Mathieu  
Filipovic, Damir  
Date Issued

2017

Publisher

Wiley-Blackwell

Published in
Mathematical Finance
Volume

27

Issue

2

Start page

534

End page

567

Subjects

model uncertainty

•

scenario aggregation

•

expected shortfall

•

value-at-risk

•

statistical divergence

•

Swiss Solvency Test

Editorial or Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
CSF  
Available on Infoscience
May 1, 2017
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/136778
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