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Separability vs. robustness of Orlicz spaces: financial and economic perspectives

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  • Felix-Benedikt Liebrich
  • Max Nendel

Abstract

We investigate robust Orlicz spaces as a generalisation of robust $L^p$-spaces. Two constructions of such spaces are distinguished, a top-down approach and a bottom-up approach. We show that separability of robust Orlicz spaces or their subspaces has very strong implications in terms of the dominatedness of the set of priors and the lack of order completeness. Our results have subtle implications for the field of robust finance. For instance, norm closures of bounded continuous functions with respect to the worst-case $L^p$-norm, as considered in the $G$-framework, lead to spaces which are lattice isomorphic to a sublattice of a classical $L^1$-space lacking, however, any form of order completeness. We further show that the topological spanning power of options is always limited under nondominated uncertainty.

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  • Felix-Benedikt Liebrich & Max Nendel, 2020. "Separability vs. robustness of Orlicz spaces: financial and economic perspectives," Papers 2009.09007, arXiv.org, revised May 2021.
    • Handle: RePEc:arx:papers:2009.09007
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