2) To deny someone credit that they deserve. This is generally something a person does to him/herself.
I sold your sister short last year for $100, then bought her back this year for a can of Skoal and a junior bacon cheeseburger. Damn that rag has really started to circle the drain.
You: "So you're not going to let me beat it up, are you?"
Girl: "Nope, sorry. Denied! But don't sell yourself short...3 inches isn't really that small. At least you've got my chihuahua beat...I think."