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Hard · derivatives · Quant Researcher interview question · volatility, finite-difference, numpy, quant
The Local Volatility model, introduced by Bruno Dupire, provides a method to derive a deterministic volatility surface $\sigma_{loc}(K, T)$ that perfectly replicates market prices of European options across all strikes and maturities. This calibration is fundamental in quantitative finance for pricing exotic derivatives consistently with the observed volatility smile. Task Implement a function solution that calibrates the Local Volatility surface from a given grid of Call option prices using Du