The Stop-Loss Start-Gain Paradox and Option Valuation: A New Decomposition into Intrinsic and Time Value, by Peter P. Carr and Robert A. Jarrow, in The Review of Financial Studies, Volume 3, Issue 3, 1 July 1990, Pages 469–492
In this article a paradox is explained, and I don't quite understand why this is a paradox. I do understand the trading strategy concept, but in order for the strategy to be a 'paradox' at some point we need to assume that the strategy is self-financing. But what indicates that?
In other words: Why does the strategy seem to contradict the usual Black-Scholes replication and pricing?