On s-additive robust representation of convex risk measures for unbounded financial positions in the presence of uncertainty about the market model



Fenchel-Legendre transform βρ and its counterpart αρ for the probability measures.

Lemma 6.1 Let X1, X2 X with X1 X2. Then there exists some c* ] ρ(0), [ such that the representation

ρ(Y) =


max

Λρ≤c*}


(Λ(Y) βρ(Λ)) holds for every Y X with X1 Y X2. Moreover, for every Y X with


X1 Y X2 we have βρ(Λ) c* if ρ(Y) = -Λ(Y) βρ (Λ).


Proof:

Let Y X with X1 Y X. By Proposition 1.1 there is some Λ β-1(R) with ρ(Y) = Λ(Y) βρ(Λ). Then

βρ(Λ) = Λ(2Y) ρ(Y) + Λ(Y) ρ(2Y) + βρ(Λ) ρ(Y) + Λ(Y) = ρ(2Y) 2ρ(Y) ρ(2Xχ) 2ρ(X2).

Therefore any c > max{ρ(2X1) 2ρ(X2), ρ(0)} is as required.                                               I

Lemma 6.2 Let X X with X inf Z, where E X is assumed to be downward directed, i.e. for Z1 , Z2 E
ZE

there is some Z E with Z min{Z1 , Z2}. Furthermore let Λ βρ-1 (R).

Then inf Λ(Z) = Λ(X) if inf p(λ(Z X)) = ρ(0) for arbitrary λ > 0.
ZE               ZE

Proof:

For arbitrary λ > 0 and every Z E we have βρ(Λ) ≥ —A(λ(Z X)) p(λ(Z X)), and therefore by

assumption


0 inf Λ(Z X) βρ(ΔL÷2p(0) .
ZE                  λ

Finally, by taking λ ↑ ∞, we obtain inf Λ(Z X) = 0 because 0 βρ (Λ) + ρ(0) < . The proof is now complete.
ZE

We may divide the domain of βρ into the classes {βρ c} (p(0) = inf βρ < c < ∞). The following topological
property of these classes is crucial.

Lemma 6.3 {βρ c} is compact w.r.t. the product topology on RX for every c ] ρ(0), [.

Proof:

Let c ] ρ(0), [, and let (Λi)iI be a net in {βρ c} which converges to some Λ RX w.r.t. the product
topology. Obviously, Λ is a positive linear form on
X which extends π. Furthermore

Λ(X) ρ(X) = lim(Λi(X) ρ(X)) limsupβρi) c for X X.

ii

Therefore {βρ c} is closed w.r.t. the product topology, and the proof may be completed by the application of
Tychonoff’s theorem because
{βρ c} X [c ρ(X),c + ρ(XX)].                                   И

X X

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