Coherent upper and lower previsions are becoming more and more popular as a mathematical model for robust valuations under uncertainty. Likewise, the mathematically equivalent class of coherent risk measures is attracting a lot attention in mathematical finance. In this paper, we show that a misinterpretation of upper previsions demands a closer examination of the basis of the theory of imprecise previsions. As a consequence, we obtain a new interpretation of coherent lower previsions as fair prices, a class of coherent variability measures, and a new type of conditioning for coherent lower previsions.
Keywords. Coherent previsions, coherent risk measures, variability measures, fair price, conditioning.
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Authors addresses:
Departement Mathematik
ETH Zurich
ETH-Zentrum, HG G 51.2 - Raemistrasse 101
8092 Zurich
Switzerland
E-mail addresses:
| Sebastian Maass | sebastian.maass@math.ethz.ch |