(Answered) Local and stochastic volatilityawhat is a volatility

Engineering

Local and Stochastic volatility:

a. What is a volatility surface and how does it point in general to the limitations of the Black-Scholes model? Discuss.

b. Describe the algorithm based on the Newton method to compute implied volatilities.

c. Briefly explain the main differences and common features of local and stochastic volatility models.

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Computer Engineering, Engineering

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