Risk measures under model uncertainty: a Bayesian viewpoint (Q6147108)

The authors introduce two kinds of risk measures with respect to some reference probability measure, which both allow for a certain order structure and domination property. Conditions are provided under which the corresponding robust risk measures, being defined as the supremum over all risk measures induced by a set of probability measures, can be represented classically in terms of one single probability measure. The authors focus on the mixture probability measure obtained via mixing over a set of probability measures using some prior, which represents for instance the regulator's beliefs. The classical representation in terms of the mixture probability measure can then be interpreted as a Bayesian approach to robust risk measures.