Final answer:
Linear interpolation is used to calculate the implied volatility of a European call option with a strike price situated between two options with known prices and volatilities.
Step-by-step explanation:
The correct answer is option Mathematics as the question involves calculating the interpolated implied volatility of a European call option, which requires mathematical skills, particularly in finance and statistics.
Implied volatility represents the market's view of the likelihood of changes in a given security’s price. Investors can use it to anticipate future fluctuations and is essential in pricing options. In situations where implied volatility for a particular strike price is not directly observable, it is common to interpolate between known volatilities.
To answer this question, you must understand linear interpolation, which in this context involves finding a value within two known values at linearly spaced intervals.
Applying this concept to the given implied volatility information for the European call options would require a calculation based on the two given strike prices and their associated option prices.