Measure Theory in a Lecture

Primbs, MS&E345 1
 Perspective

σ-Algebras

Measurable Functions

Measure Theory Measure and Integration

Radon-Nikodym Theorem

Riesz Representation Theorem

Probability Theory

Primbs, MS&E345 2
A little perspective:
Riemann did this...

...

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A little perspective:
Lebesgue did this...

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A little perspective:
Lebesgue did this...
Why is this better????

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 A little perspective:
Lebesgue did this...
Why is this better???? Consider the function:

1 at irrationals
f =
0 at rationals
Height
If we follow Lebesgue’s reasoning,
then the integral of this function over
the set [0,1] should be:
Width of Irrationals
(Height) x (width of irrationals)
= 1 x (measure of irrationals)

If we can “measure” the size of superlevel sets, we can integrate a lot of function!

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Measure Theory begins from this simple motivation.

If you remember a couple of simple principles, measure and

integration theory becomes quite intuitive.

The first principle is this...

Integration is about functions. Measure theory is about sets.

The connection between functions and sets is super/sub-level
sets.

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 Perspective

σ-Algebras

Measurable Functions

Measure Theory Measure and Integration

Radon-Nikodym Theorem

Riesz Representation Theorem

Probability Theory

Primbs, MS&E345 8
 Measure theory is about measuring the size of things.

In math we measure the size of sets.

How big is the set A? Set A

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“Size” should have the following property:
The size of the union of disjoint sets should equal the
sum of the sizes of the individual sets.
Makes sense.... but there is a problem with this...

Consider the interval [0,1]. It is the disjoint union of all

real numbers between 0 and 1. Therefore, according to
above, the size of [0,1] should be the sum of the sizes of a
single real number.

If the size of a singleton is 0 then the size of [0,1] is 0.

If the size of a singleton is non-zero, then the size of [0,1] is
infinity!
This shows we have to be a bit more careful.

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 Sigma Algebras (σ-algebra)
Consider a set Ω.
Let F be a collection of subsets of Ω.

An algebra of sets is
F is a σ-algebra if:
closed under finite set
operations. A σ-algebra
1) Ω ∈ F is closed under
countable set operations.
2) A ∈ F ⇒ A C
∈F In mathematics, σ often
refers to “countable”.
3) A1 , A2 ∈ F ⇒ A1 ∩ A2 ∈ F
∞
4) A1 , A2 , A3 ,... ∈ F ⇒ Ai ∈ F
i =1

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 Perspective

σ-Algebras

Measurable Functions

Measure Theory Measure and Integration

Radon-Nikodym Theorem

Riesz Representation Theorem

Probability Theory

Primbs, MS&E345 12
Algebras are what we need for super/sub-level sets of a vector
space of indicator functions.

1A1 1A2

A1 A2

A1 ∩ A2
α11A1 + α 21A2
A1 ∪ A2
Superlevel Sets
A1 A2

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 A1 ∩ A2
α11A1 + α 21A2
A1 ∪ A2
Superlevel Sets
A1 A2

Simple Functions
Simple functions are finite linear combinations of of
indicator functions. n
∑α 1
i =1
i Ai

σ−algebras let us take limits of these. That is more interesting!!

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Measurable Functions
Given a Measurable Space (Ω,F)
We say that a function: f :Ω →ℜ is measurable with
respect to F if: y = f (ω )

f ({ y ≥ α }) ∈ F ∀α ∈ ℜ
−1

This simply says that a function is measurable with respect

to the σ-algebra if all its superlevel sets are in the σ-algebra.

Hence, a measurable function is one that when we slice it

like Lebesgue, we can measure the “width” of the part of the
function above the slice. Simple...right?

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 Another equivalent way to think of measurable functions is as
the pointwise limit of simple functions.

In fact, if a measurable function is non-negative, we can say it

is the increasing pointwise limit of simple functions.

This is simply going back to Lebesgue’s picture...

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Intuition behind measurable functions.
They are “constant on the sets in the sigma algebra.”
Ω ∈ [0,1)
F = {φ , [0,1), [0, 12 ), [ 12 ,1)}
What do measurable functions look like?
Yes Yes No

1 1 1
0 2 1 0 2 1 0 2 1
Intuitively speaking, Measurable functions are constant on the sets in the σ-alg.
More accurately, they are limits of functions are constant on the sets in the σ-
algebra. The σ in σ-algebra gives us this.
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 “Information” and σ-Algebras.

1
0 2 1
Since measurable functions are “constant” on the σ-algebra, if
I am trying to determine information from a measurable
function, the σ-algebra determines the information that I can
obtain.
I measure y = f (ω ) What is the most information that I
determine about ω?
The best possible I can do is to say that ω ∈ A with A∈ F
σ-algebras determine the amount of information possible in a
function.

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 Perspective

σ-Algebras

Measurable Functions

Measure Theory Measure and Integration

Radon-Nikodym Theorem

Riesz Representation Theorem

Probability Theory

Primbs, MS&E345 19
 Measures and Integration

A measurable space (Ω,F) defines the sets can be measured.

Now we actually have to measure them...

What are the properties that “size” should satisfy.

If you think about it long enough, there are really only two...

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Definition of a measure:
Given a Measurable Space (Ω,F),
A measure is a function µ
+
:F →ℜ
satisfying two properties:

1) µ (φ ) = 0
2) If A1 , A2 , A3 ,... are disjoint
∞ ∞
µ( Ai ) = ∑ µ ( Ai )
i =1 i =1

(2) is known as “countable additivity”. However, I think

of it as “linearity and left continuity for sets”.

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 Fundamental properties of measures (or “size”):

Left Continuity: This is a trivial consequence of the definition!

Let Ai ↑ A then lim µ ( Ai ) = µ ( A)

Right Continuity: Depends on boundedness!

Let Ai ↓ A and for some i µ ( Ai ) < ∞
then lim µ ( Ai ) = µ ( A)
(Here is why we need boundedness. Consider Ai = [i, ∞) then A = φ )

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Now we can define the integral.
n
Simple Functions: ϕ = ∑α 1
i =1
i Ai

∫ ϕdµ = ∑α µ ( A )
i =1
i i

Positive Functions:
Since positive measurable functions can be written as the
increasing pointwise limit of simple functions, we define the
integral as
∫ fdµ = sup
ϕ
∫ ϕdµ
≤f

+ −
For a general measurable function write f = f − f

∫ fdµ = ∫ f + dµ − ∫ f − dµ

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 How should I think about ∫ fdµ
A

This picture says everything!!!!

Integrals are like

f measures! They
measure the size of a
set. We just describe
that set by a
This is a set! and the function.
integral is measuring Therefore, integrals
the “size” of this set! should satisfy the
properties of
measures.

A
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 This leads us to another important principle...

Measures and integrals are different descriptions of

of the same concept. Namely, “size”.

Therefore, they should satisfy the same properties!!

Lebesgue defined the integral so that this would be

true!

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 Measures are: Integrals are:
Left Continuous Left Continuous

Ai ↑ A ⇒ lim µ ( Ai ) = µ ( A) f i ↑ f ⇒ lim ∫ f i dµ = ∫ fdµ

Bdd Right Cont.
Ai ↓ A and µ ( Ai ) < ∞
⇒ lim µ ( Ai ) = µ ( A)
(Monotone Convergence Thm.)
Bdd Right Cont.
f i ↓ f and ∫ f i dµ < ∞
⇒ lim ∫ f i dµ = ∫ fdµ
(Bounded Convergence Thm.)

(Fatou’s Lemma, etc...)

etc... etc...
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 The Lp Spaces

A function is in L (Ω,F,µ) if ∫ dµ < ∞

p
p | f |

The Lp spaces are Banach Spaces with norm:

f p
(
= ∫ | f | dµ
p
)
1/ p

L2 is a Hilbert Space with inner product:

< f , g >= ∫ fgdµ

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 Perspective

σ-Algebras

Measurable Functions

Measure Theory Measure and Integration

Radon-Nikodym Theorem

Riesz Representation Theorem

Probability Theory

Primbs, MS&E345 28
Given a Measurable Space (Ω,F),

There exist many measures on F.

If Ω is the real line, the standard measure is “length”.

That is, the measure of each interval is its length. This
is known as “Lebesgue measure”.

The σ-algebra must contain intervals. The smallest σ-

algebra that contains all open sets (and hence intervals) is
call the “Borel” σ-algebra and is denoted B.

A course in real analysis will deal a lot with the measurable

space (ℜ, B).

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Given a Measurable Space (Ω,F),

A measurable space combined with a measure is called a

measure space. If we denote the measure by µ, we would
write the triple: (Ω,F,µ).
Given a measure space (Ω,F,µ), if we decide instead to use a
different measure, say υ, then we call this a “change of
measure”. (We should just call this using another measure!)

Let µ and υ be two measures on (Ω,F), then

υ is “absolutely continuous” with respect to µ if
µ ( A) = 0 ⇒ υ ( A) = 0 (Notation υ << µ )

υ and µ are “equivalent” if

µ ( A) = 0 ⇔ υ ( A) = 0
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The Radon-Nikodym Theorem
If υ<<µ then υ is actually the integral of a function wrt µ.

dµ dυ
dυ = dµ = gdµ
dυ dµ
dυ dυ
g= υ ( A) = ∫ dυ = ∫ dµ = ∫ gdµ
dµ dµ
A A A
g
υ ( A) = ∫ gdµ
dυ A

g is known as the Radon-

Nikodym derivative and denoted:
dυ
dµ g=
dµ
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The Radon-Nikodym Theorem
If υ<<µ then υ is actually the integral of a function wrt µ.
Idea of proof: Create the function through its superlevel sets

Consider the set function (this is actually a signed measure)

(υ − αµ )( A) = υ ( A) − αµ ( A)
Choose α and let Aα be the largest set such that
υ ( A) − αµ ( A) ≥ 0 for all A ⊆ Aα
(You must prove such an Aα exists.)

Then Aα is the α-superlevel set of g.

Now, given superlevel sets, we can construct a function by:
g (ω ) = sup{α | ω ∈ Aα }
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 Perspective

σ-Algebras

Measurable Functions

Measure Theory Measure and Integration

Radon-Nikodym Theorem

Riesz Representation Theorem

Probability Theory

Primbs, MS&E345 33
The Riesz Representation Theorem:
All continuous linear functionals on Lp are given by integration
against a function g ∈ L with 1p + 1q = 1
q

That is, let L : Lp → ℜ be a cts. linear functional.

y = L( f )
Then: L( f ) = ∫ fgdµ
Note, in L2 this becomes:

L( f ) = ∫ fgdµ =< f , g >

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The Riesz Representation Theorem:
All continuous linear functionals on Lp are given by integration
against a function g ∈ L with 1p + 1q = 1
q

What is the idea behind the proof:

Linearity allows you to break things into building blocks,
operate on them, then add them all together.

What are the building blocks of measurable functions.

Indicator functions! Of course!

Let’s define a set valued function from indicator functions:
υ ( A) = L(1A )
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The Riesz Representation Theorem:
All continuous linear functionals on Lp are given by integration
against a function g ∈ L with 1p + 1q = 1
q

A set valued function υ ( A) = L(1A )

How does L operate on simple functions
n n n
L(ϕ ) = L(∑ α i 1Ai ) = ∑ α i L(1Ai ) = ∑ α iυ ( A)
i =1 i =1 i =1

This looks like an integral with υ the measure! L(ϕ ) = ϕdυ ∫

But, it is not too hard to show that υ is a (signed) measure.
(countable additivity follows from continuity).
Furthermore, υ<<µ. Radon-Nikodym then says dυ=gdµ.

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The Riesz Representation Theorem:
All continuous linear functionals on Lp are given by integration
against a function g ∈ L with 1p + 1q = 1
q

A set valued function υ ( A) = L(1A )

How does L operate on simple functions
n n n
L(ϕ ) = L(∑ α i 1Ai ) = ∑ α i L(1Ai ) = ∑ α iυ ( A)
i =1 i =1 i =1

This looks like an integral with υ the measure! L(ϕ ) = ϕgdµ ∫

For measurable functions it follows from limits and continuity.
L(ϕ ) = ∫ fgdµ
The details are left as an “easy” exercise for the reader...
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 The Riesz Representation Theorem and the Radon-
Nikodym Theorem are basically equivalent. You can
prove one from the other and vice-versa.

We will see the interplay between them in finance...

How does any of this relate to probability theory...

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 Perspective

σ-Algebras

Measurable Functions

Measure Theory Measure and Integration

Radon-Nikodym Theorem

Riesz Representation Theorem

Probability Theory

Primbs, MS&E345 39
 A probability measure P is a measure that satisfies P (Ω) = 1
That is, the measure of the whole space is 1.

A random variable is a measurable function.

X (ω )
The expectation of a random variable is its integral:
E ( X ) = ∫ XdP

A density function is the Radon-Nikodym derivative wrt

Lebesgue measure:
∞
dP
fX = E ( X ) = ∫ XdP = ∫ xf X ( x)dx
dx −∞

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 A probability measure P is a measure that satisfies P (Ω) = 1
That is, the measure of the whole space is 1.

In finance we will talk about expectations with respect

to different measures.
P E P ( X ) = ∫ XdP
Q E Q ( X ) = ∫ XdQ

And write expectations in terms of the different measures:

dP
E ( X ) = ∫ XdP = ∫ X
P
dQ =∫ XϕdQ = E Q ( Xϕ )
dQ
dP
where = ϕ or dP = ϕdQ
dQ
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