Karoui, Nicole El; Jeanblanc-Picquè, Monique; Shreve, … - In: Mathematical Finance 8 (1998) 2, pp. 93-126
Consider an option on a stock whose volatility is unknown and stochastic. An agent assumes this volatility to be a specific function of time and the stock price, knowing that this assumption may result in a misspecification of the volatility. However, if the misspecified volatility dominates the...