Hedging with Small Uncertainty Aversion
  We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on their "distance" to a reference local volatility model. In the limit for small uncertainty aversion, this leads to explicit formulas for prices and hedging strategies in terms of the security's cash gamma. 
Sebastian Herrmann, Johannes Muhle-Karbe, Frank Thomas Seifried
q-fin.MF math.OC math.PR