Nonlinear expectation
In probability theory, a nonlinear expectation is a nonlinear generalization of the expectation. Nonlinear expectations are useful in utility theory as they more closely match human behavior than traditional expectations.Definition
A functional is a nonlinear expectation if it satisfies:
- Monotonicity: if such that then
- Preserving of constants: if then
Often other properties are also desirable, for instance convexity, subadditivity, positive homogeneity, and translative of constants.Examples
