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Hard · derivatives · Quant Researcher interview question · carr_madan, fourier_pricing, characteristic_function, option_pricing, numerical_integration, derivatives
Fourier-based option pricing transforms the valuation problem into the frequency domain, where smooth characteristic functions are used instead of non-smooth payoffs. The Carr-Madan (1999) method provides a robust framework for this by expressing a damped call price as a Fourier integral. This technique is highly versatile in quantitative finance, as it allows for pricing under various models (e.g., Black-Scholes, Heston, jump-diffusion) using a single numerical integration engine. Task Impleme