[Math] Intuition for random variable being $\sigma$-algebra measurable

intuitionprobability theorystochastic-calculusstochastic-processes

Is there some sort of intuition or a good ilustrative example for random variables being $\sigma$-algebra measurable? I understand the definition, but when looking at martingales, the meaning of random variables being measurable eludes me. So my question is mainly aimed on the case of martingales where sequence of random variables is adapted to some filtration.

In Interpretation of sigma algebra, the asker asks (among many others) a similar question, but I don't think it contains an actual answer to this question.

Best Answer

The random variable $X$ is measurable with respect to $\sigma$-algebra $\mathfrak F$ if $X=\mathbb E(X\mid\mathfrak F)$.

One can understand this in a few steps:

  1. $\mathbb E(X\mid A)$, where $A$ is an event, is the expected value of $X$ given that $A$ occurs;
  2. $\mathbb E(X\mid Y)$, where $Y$ is a random variable, is a random variable whose value at $\omega\in\Omega$ is $\mathbb E(X\mid A)$ where $A$ is the event $\{Y=y\}$ and $y=Y(\omega)$;
  3. $\mathbb E(X\mid \mathbf 1_A)$ is the case $Y=\mathbf 1_A$, and $\mathbf 1_A(\omega)$ is 1 if $\omega\in A$, and 0 otherwise. This is the random variable that returns $\mathbb E(X\mid A)$ if $\omega\in A$, and $\mathbb E(X\mid A^c)$ if $\omega\not\in A$;

  4. $\mathbb E(X\mid \mathfrak F)$, where $\mathfrak F=\{\varnothing, \Omega, A, A^c\}$, is the same as $\mathbb E(X\mid 1_A)$;

  5. $\mathbb E(X\mid \mathfrak F)$, where $\mathfrak F=\{\varnothing, \Omega, A, A^c, B, B^c, A\cup B, A\cup B^c,\dots\}$ ($2^{2^2}=16$ elements), is something we could call $\mathbb E(X\mid 1_A, 1_B)$ and which returns $\mathbb E(X\mid A\cap B^c)$, or $\mathbb E(X\mid A^c\cap B)$, or $\mathbb E(X\mid A\cap B)$, or $\mathbb E(X\mid A^c\cap B^c)$; it is sort of superfluous to list $A\cup B$ etc. in $\mathfrak F$, it would suffice to list a generating set, but the generating set may not be unique so it is best to list all of $\mathfrak F$;

  6. $\mathbb E(X\mid \mathfrak F)$, where $\mathfrak F=\mathfrak F_t$ is a $\sigma$-algebra corresponding to what's known at time $t$, is an infinite version of (5). It's a random variable that returns our best estimate of $X$, given answers to all the questions "$\omega\in A$?" for $A\in\mathcal F$. If that answer is always just the same as $X$, then $X$ is $\mathfrak F$-measurable or "known at time $t$".