An Iterative Approximation of the Sublinear Expectation of an Arbitrary Function of G-normal Distribution and the Solution to the Corresponding G-heat Equation

arXiv1804.10737MaRDI QIDQ6300928FDOQ6300928

Authors: Y. F. Li, Reg J. Kulperger 

Publication date: 27 April 2018

Abstract: It has been a well-known problem in the $G$-framework that it is hard to compute the sublinear expectation of the $G$-normal distribution $hatmathbbE[varphi(X)]$ when $varphi$ is neither convex nor concave, if not involving any PDE techniques to solve the corresponding $G$-heat equation. Recently, we have established an efficient iterative method able to compute the sublinear expectation of emph{arbitrary} functions of the $G$-normal distribution, which directly applies the emph{Nonlinear Central Limit Theorem} in the $G$-framework to a sequence of variance-uncertain random variables following the emph{Semi-$G$-normal Distribution}, a newly defined concept with a nice emph{Integral Representation}, behaving like a ladder in both theory and intuition, helping us climb from the ground of classical normal distribution to approach the peak of $G$-normal distribution through the emph{iteratively maximizing} steps. The series of iteration functions actually produce the whole emph{solution surface} of the $G$-heat equation on a given time grid.

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