[944] About HW6 Q2

[Yan Yu]

Hi professor,

When the implied volatility differs from the real volatility, and we don't
know the real one, we should hedge using the implied vol right?

Then the delta hedge is not sufficient, and the result portfolio should not
be risk free.

Then the result should contain dW, and we cannot say when sigma2 > sigma1,
the terminated portfolio value is positive.

But if we use the "volatility arbitrage" idea, no more dW remains, so we
can be certain the value is positive or not. ( But it is based on the view
of the God right? )

So which one is the case of the Q2 of the HW6?

Best,
Yan
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