This paper provides a coherent method for scenario aggregation addressing model uncertainty. It is based on divergence … 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 …

Despite well-known shortcomings as a risk measure, Value-at-Risk (VaR) is still the industry and regulatory standard … for the calculation of risk capital in banking and insurance. This paper is concerned with the numerical estimation of the …