Volatility Surface Interpolation - Quant Researcher Interview Question
Difficulty: Hard
Category: derivatives
Asked at: Akuna, Bloomberg, Société Générale, Barclays, Citadel Securities, Optiver, JPMorgan, Goldman Sachs
Topics: volatility, interpolation, scipy, spline
Problem Description
Constructing a smooth volatility surface from discrete market quotes is fundamental for accurate derivative pricing and risk management. Interpolating in log-moneyness versus total variance space, rather than raw strike-volatility space, enhances numerical stability and helps maintain arbitrage-free conditions across the surface.
Task
Implement the function interpolate_vol_surface to estimate implied volatilities for a list of target strikes based on a set of known market quotes. The implementa
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