Derivatives Pricing Beyond Black-Scholes: Risk-Neutral Measure, Dupire Local Volatility, Heston Stochastic Volatility, SABR, Variance Swaps, and Volatility Surface Arbitrage

Deep End Era. Engineering with Sankalp · Oct 29, 2026 · 1h 11m

Welcome back to The Deep End. We are in Episode 433, the fourth installment of our ten-part series on Quantitative Finance, Market Microstructure, and Risk Engineering. In our first three episodes, we worked inside the world of linear delta-one cash equities and futures: Limit Order Books and FPGA matching engines in Episode 430, Glosten-Milgrom and Kyle adverse selection in Episode 431, and Almgren-Chriss and Square-Root market impact trajectories in Episode 432. Today, we cross the Rubicon from linear cash instruments into Non-Linear Derivatives Engineering. Picture the Chicago Board…