P-Sensitive Functions and Localizations
Probability
2026-01-28 v1 Functional Analysis
Optimization and Control
Mathematical Finance
Abstract
This paper assumes a robust stochastic model where a set of probability measures replaces the single probability measure of dominated models. We introduce and study -sensitive functions defined on robust function spaces of random variables. We show that -sensitive functions are precisely those that admit a representation via so-called functional localization. The theory is applied to solving robust optimization problems, to convex risk measures, and to the study of no arbitrage in robust one-period financial models.
Cite
@article{arxiv.2601.19511,
title = {P-Sensitive Functions and Localizations},
author = {Johannes Langner and Gregor Svindland},
journal= {arXiv preprint arXiv:2601.19511},
year = {2026}
}