Law of Large Numbers and Central Limit Theorem under Nonlinear Expectations

TL;DR

This paper establishes the law of large numbers and central limit theorem within the framework of nonlinear G-expectations, showing that the limit distribution in the CLT is a G-normal distribution, extending classical probability results.

Contribution

It introduces LLN and CLT under sublinear G-expectation, demonstrating the G-normal distribution as the limit in the CLT, and leverages nonlinear PDE estimates for concise proofs.

Findings

LLN and CLT hold under G-expectation.

The CLT's limit distribution is a G-normal distribution.

Proofs utilize nonlinear PDE estimates.

Abstract

The law of large numbers (LLN) and central limit theorem (CLT) are long and widely been known as two fundamental results in probability theory. Recently problems of model uncertainties in statistics, measures of risk and superhedging in finance motivated us to introduce, in [4] and [5] (see also [2], [3] and references herein), a new notion of sublinear expectation, called \textquotedblleft% $G$-expectation\textquotedblright, and the related \textquotedblleft$G$-normal distribution\textquotedblright from which we were able to define G-Brownian motion as well as the corresponding stochastic calculus. The notion of G-normal distribution plays the same important rule in the theory of sublinear expectation as that of normal distribution in the classic probability theory. It is then natural and interesting to ask if we have the corresponding LLN and CLT under a sublinear expectation and, in particular, if the corresponding limit distribution of the CLT is a G-normal distribution. This paper gives an affirmative answer. The proof of our CLT is short since we borrow a deep interior estimate of fully nonlinear PDE in [6] which extended a profound result of [1] (see also [7]) to parabolic PDEs. The assumptions of our LLN and CLT can be still improved. But the discovered phenomenon plays the same important rule in the theory of nonlinear expectation as that of the classical LLN and CLT in classic probability theory.