Measures of Risk

When the prospect space \(\mathcal {Z}\) Prospect spacerandom variables is a vector space of real random variables defined on some probability space \((\varOmega ,\mathcal {F},P)\) , we may specify our preference relation ) by directly defining its numerical representation. In this chapter, and in large portions of this book, we shall be concerned with a special class of numerical representations of preferences that we call convex or coherent measures of risk.