On Dupire local volatility
The Dupire equation is surely one of the biggest technological discovery in Equity derivatives; it has really changed how the market analyse and risk manage structure products. Even though there are many deficiencies on this model, it is being used in an industrial way. By industrial, I really mean like a factory. Even though it may not take into account many risk associated with the products, The Local Volatility Model is the benchmark for pricing any structured products. Th